You may have witnessed or heard of children wasting their inheritance on a fast car or making unwise decisions after inheriting the family business.
So, how can you protect your kids from such a fate? By actively preparing them for their inheritance.
Here is how you can do this:
Communicate with them about finances
It’s crucial to encourage open conversations about finances in your home. Talk to your kids from an early age about the assets you own and the plans you have for them. For example, if you have a small business, let them know what it entails and how you plan to grow it.
If you can comfortably discuss general financial matters with your kids when they are younger, it can be easier to manage more complex discussions in the future.
Educate them about finances
It can be disastrous for anyone to receive a large amount of money without knowing how to preserve and protect the asset. Thus, consider educating your children about asset growth and protection.
Some easy ways to educate young children are to (1) encourage them to save money in a jar or piggy bank, (2) have them open a savings account, (3) give them an allowance and discuss how to spend/save it, (4) tell them the cost of household items, (5) involve them when setting a family budget and (6) involve them in spending decisions, etc.
When your children become teenagers, encourage them to take a summer job and teach them about investments, debts, taxes and credit scores.
When they become young adults and start working, you can help them start investing, monitor their taxes, start an emergency fund, encourage them to have their own assets and so forth.
When your children are financially literate in every stage of their lives, they have a better chance of managing their inheritance effectively.
Preparing your kids for their inheritance should be one of the steps you take during estate planning. You should also get legal help to draft a reliable estate plan that meets your children’s future needs.