Feb 10, 2020  | Tags: wealth transfer, estate planning

Our Insights

How important is it to educate the next generation about money?

As it turns out, there’s a dollar for every reason to do so. 3.5 trillion Australian dollars, to be precise.

Experts estimate that Baby Boomers will be passing on roughly that amount to the next generation over the next twenty years. 

That’s a lot of cash poised to roll into the market. But given current attitudes towards wealth transfer, there’s an equal amount of uncertainty over what to expect.

Intergenerational Resentment

Broadly speaking, the Baby Boomer generation has enjoyed significant financial advantages in their lifetime. This contrasts with the struggles that younger generations now have, with many struggling to break into the housing market while also facing a plateau in wage growth.

Feeling that they’ve been saddled with an economic disadvantage, it has been reported that other generations (Millennials, specifically) are harbouring some resentment towards their elders.

Some believe this is why more young people tend to express a distaste for the financial advice of their parents and grandparents, and this complicates communication about money between generations.

Changing Attitudes Towards Money

More than in past years, people are valuing familial and interpersonal relationships over money.

Many are focused on carving out a lifestyle and legacy that doesn’t centre on growing wealth.

As a result, there’s a decreased interest in preserving and maintaining the family legacy by passing wealth on through multiple generations. In fact, some financial forecasters predict that up to 90% of Australian families will lose their acquired wealth by the third generation. 

So combine the intergenerational resentment with changing financial values and you get a recipe for an apathetic generation that’s vastly underprepared to make the best use of the wealth that’s headed their way over the next couple of decades.

A Lack of Clear Communication

If the Millennial generation is underprepared to manage the wealth left to them by their Baby Boomer relatives, then it isn’t just the kids who are to blame.

According to a recent survey, over half of Australian parents admit that they haven’t even discussed with their kids what their plans are for the family wealth.

As we touched on earlier, communication about how to handle the family wealth tends to be a bit complicated.

Discussing money with close family members these days seems to be harder than ever before. People prefer to avoid those awkward conversations where they have to confront their own mortality or that of their loved ones.

Preparation to Take Up the Financial Mantle

You need a concrete wealth transfer plan and the success of that plan is contingent upon clear communication between the generations. This becomes all the more urgent when you consider the magnitude of the amount of money that the next generation will inherit.  

That 3.5 trillion dollar boon could be a great thing for the Australian economy, if distributed wisely.

But right now, it represents major uncertainty. 

This is why it’s extremely important for up and coming generations, the next batch of Australians who will keep the economy churning, to have a comprehensive financial education.

More specifically, this education needs to have a very personal application so the next generation will know exactly how to manage the funds they are gifted over the next several years. If you’re a Baby Boomer, then you need to start discussing money with your children and grandchildren now.

Communicate your desires, hopes and expectations regarding how your kids and grandkids should manage the assets you leave to them. Ensure they're receiving wise financial advice, and ready for what's next. 

Get Advice

Are you preparing to pass on your wealth and want to do it right? Or are you a young person who needs to get ready to manage wealth?

Work with experts to get the wealth transfer plan right. 

Talk to the team at Calder Wealth Management. Call us on (08) 8373 3333 to schedule your free initial appointment. 

Written by Ben Calder at Calder Wealth Management.