- This wealth could be theirs some day
The main reason that some degree of transparency might be appropriate is that, unless you are planning to disinherit your children, all or part of your wealth will probably go to them when you die. As it happens, studies show that about one-third of heirs squander their inheritance shortly after receiving it. Engaging in discussions when they reach an appropriate age could help to prevent this outcome.
- Pass along values, too
Many individuals who enjoy considerable wealth have a desire to “give back to society” by providing tangible support to various causes. If you are in this position, it could be a reason to be fairly open with your children, getting them involved in the choice of causes to support and the amount of funds to donate.
- An opportunity to promote financial literacy
As we know, financial literacy, i.e., an individual’s ability to use knowledge and skills to effectively manage the financial tools available to them, is an important issue in Canada. Parents with a certain degree of wealth have an opportunity to gradually expose their adult children to complex financial concepts such as investments, business ownership or overall financial planning.
- Getting help
As their wealth grows, parents usually look at strategies for, among other things, reducing the tax payable during a business transfer, if they are entrepreneurs, or in the event of a death. These complex strategies – a trust or foundation, for example – could involve the whole family. Reaching out to a financial security advisor, mutual fund representative and other professionals as a family could be beneficial.
The following sources were used in preparing this article:
Financial Post, ‘‘Bequest boom': Canadian parents will pass on $750 billion to kids over next decade’’, June 7, 2016.
Forbes, ‘‘The 5 Most Important Money Lessons To Teach Your Kids’’, October 15, 2013.
HEC Montréal, ‘‘Parlez-vous finances ?’’ , November 3, 2017.
Market Watch, ‘‘One in three Americans who get an inheritance blow it’’, September 3, 2015.
Morgan Stanley, ‘‘Opening Pandora's Box’’.
The Balance, ‘‘How to teach kids about charity’’, June 9, 2017.
The Globe and Mail, ‘‘A big fear for wealthy families: spoiled kids’’, June 27, 2017.
The New York Times, ‘‘Why Affluent Parents Clam Up About Their Incomes’’, June 24, 2015.
The Star, ‘‘How the wealthy talk to their children about money’’, June 3, 2017.
Time, ‘‘70% of Rich Families Lose Their Wealth by the Second Generation’’, June 17, 2015.