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8 Steps for Passing Your Wealth, Values, and Financial Smarts to the Next Generation Thumbnail

8 Steps for Passing Your Wealth, Values, and Financial Smarts to the Next Generation

One day, our children Anna and Will marched up with a jar of coins and announced, “We’re saving for a dirt bike.” But then Anna said something that made our jaws drop even further. “We’re doing this together, but next year, I need to start saving up my own money for college.” That’s what every parent wants, isn’t it—moments that indicate our children are internalizing solid financial values? If you want to feel optimism about passing on your wealth, values, and financial smarts to your children, here are eight steps you can take to undertake that process.

1. Establish an Obligation to Family Stewardship
Family stewards are motivated by a healthy obligation to care for future generations. They view their money, not as a personal possession, but as a trust to maintain, grow, and pass on to others. Kids will absorb a set of values and perspective about what money should be used for, simply by interpreting the behaviors and attitudes you show them. You need to be intentional about making sure their takeaways are in line with your own vision for wealth, and raise them up to be family stewards by reminding them of their obligation toward future generations and society.

 2. Show, Share, and Surround
Show your children healthy financial habits, like a strong work ethic, saving, enjoying, and giving. Model the importance of saving, and instill cost consciousness so they understand the value of their money. Share stories of your family history to help your kids understand the hard work that went into building the family wealth, discussing both the good and hard times. Sharing is a major commonality in families who successfully pass on wealth. Surround your kids with positive financial influences, and protect them against negative influences by building up their financial literacy and introducing them to members of your financial team.

3. Teach Financial Literacy
Financial education is the formal instruction on formulas and concepts. Financial literacy is the ability to apply financial knowledge, and it includes the motivation, confidence, and experience to manage wealth responsibility. Essentially, kids need practice. Teach your children financial literacy through providing them with financial experiences, such as money management, budgeting, philanthropy, and investing. The way you structure their allowance, put them in charge of financial errands like grocery shopping, or encourage high-school jobs all affects a child’s financial literacy. These experiences will be formulative, and will help your children become self-made, confident, financial leaders.

4. Build up More Complicated Financial Literacy
Once your kids have a basic grasp on the basics of financial literacy, you can begin teaching them to practice more complicated financial literacy fundamentals, like the power of compound interest. You can also teach them what it means to be financially independent—the ability to live off the income and growth of your investments, along with any fixed income sources, so you’re not reliant on an employer or paycheck. They should also understand the difference between human capital versus financial capital. Financial capital is the money you possess, while human capital refers to a person’s earning potential.

 5. Learn the Basics
You should learn the important basics about investing, insurance, debt, and taxes, so that your children understand how to use each area of finance strategically to grow their wealth. Failing to learn these basic concepts can easily lead to your wealth being undermined. If you don’t invest wisely, you essentially give your money to inflation or take on unnecessary risk. If you don’t protect your assets with insurance, you’re vulnerable to unexpected circumstances. If you don’t handle your debt well, you lose money to creditors. If you don’t manage your taxes well, you give a disproportionate amount to the government.

 6. Prepare an Estate Plan
If you care enough to pass on your wealth to your kids, you should also be willing to do the hard work required to plan your legacy as well. Choosing to do so means you protect your children during one of the most potentially vulnerable times of their lives: when they lose you. Effectively prepare your estate plan by organizing your financial information, and maximize the efficiency of your wealth transfer by using relevant legal tools. By using legal tools, you can maximize the efficiency of your wealth transfer, and protect your heirs from undue taxation.

 7. Protect Yourself and Your Heirs
Protect yourself and your heirs against bad financial decision-making by learning about dangerous biases, behaviors, and circumstances. Much of your hard work can be undermined if you or your heirs have unhealthy biases in place, or are negatively influenced by dangerous circumstances or untrustworthy people. Be aware of how emotions can confuse your financial decision-making and learn to practice restraint and self-control when making any decisions. Don’t be guided by fear or ambition. Also, beware of potential bad actors out there who present themselves as unbiased financial resources. Get a second opinion before following any recommendations.

 8. Assemble a Team
Assemble a team of trusted advisors to help you grow your wealth and to protect you and your family during tumultuous times. A solid team of advisors would include three main experts: a CPA, a financial advisor, and an estate planning attorney. Once you get one trusted team member in place, they can refer you to other people who would be a good fit for you. Also, appoint guardians if your children are still young and living at home. Appoint trustees to help guide your children when they are young, or as long into adulthood as you feel necessary.





This article was adapted from the book Pass It On, written by Roger and Lori Gervais. Roger and Lori Gervais are proud parents of three wonderful children: Anna, Will, and Jack. Roger and Lori are also the husband-and-wife team behind The Gervais Group, named by Forbes as “Best in State Wealth Advisors” in Wisconsin. Lori, a CERTIFIED FINANCIAL PLANNER™ professional, has been recognized for her commitment to clients and to the profession by Forbes, which named her to its America’s Top Women Advisor List. Roger, a CFA® charterholder, uses his background in engineering to offer clients a unique set of problem-solving skills. Throughout their thirty years of combined experience in the industry, Roger and Lori have made it their mission to simplify the complex world of financial planning.