How to help prevent your children from wasting their inheritance

On Behalf of | Jul 5, 2023 | Estate Planning

Preserving wealth for future generations is an important financial goal for many individuals. However, ensuring that the beneficiaries, specifically your children, handle their inheritance carefully can be a challenge. A sudden windfall can lead to poor financial decisions if your children are not prepared for this responsibility.

Creating a lasting financial legacy involves more than just passing down assets; it also means imparting financial wisdom. Here are some strategies you can adopt to help your children not waste their inheritance.

Financial literacy

Start by investing in your children’s financial literacy. Teach them about budgeting, investing, saving and the consequences of poor money management. You might want to share your financial experiences, both successes and failures, as practical lessons. Encourage them to learn about taxes, real estate, stock markets and other relevant financial topics.

Purpose and value of the inheritance

Help your children understand the value of the assets they will inherit and the purpose of these assets. If you are giving the inheritance to provide financial security, assist with major life events or support entrepreneurial ventures, make this clear to them.

Gradual inheritance disbursement

Instead of passing on the entire inheritance at once, consider dispersing it in stages based on age or significant milestones. This gives your children the chance to learn from any financial mistakes they might make with an initial, smaller distribution and it can encourage them to think long-term.

Encourage your children to seek mentorship or guidance from trusted financial advisors who can provide unbiased advice. This can help them make informed decisions and prevent them from making impulsive or emotional financial choices when they receive their inheritance.