Baby Boomers Are Stressed About Handing on Their Wealth - Study

How to hand on your wealth

Having money comes with hang-ups, and one that’s especially pressing these days seems to be figuring out what to do with your wealth before you die.

For many, the way to solve the problem is simple: give the money to their children and grandchildren. Though not everyone is too keen on that idea. Over two-thirds (70%) of high-net-worth investors are concerned about their heirs “using their inheritance wisely,” according to a survey of 4,500 high-net-worth investors – individuals with more than $1 million in liquid assets – commissioned by global investment bank UBS.

An even higher number, 76%, of those surveyed identified the “smooth transfer of assets” as one of their key financial worries.

Learn more: five reasons why you should spend your kids’ inheritance

Generational Differences

At a time when the average New Zealander is facing very real financial challenges, the problem of passing on wealth seems trivial. Even so, recent studies show this is a concern among baby boomers – who are the wealthiest generation as they’ve had the most time to earn and accumulate wealth.  

The Generational Divide

A generational divide – including clashing opinions on how money should be used – is causing many of the headaches around wise spending. Money now often means different things to different people, even within the same family.

So, if you’re looking to pass on wealth, it's really important to try to help the next generation understand what makes money important to you in the first place, to help ensure your heirs are potentially aware of that – and then, respecting those boundaries.

There are no guarantees that any heirs receiving your wealth will allocate or spend it how you wish, which is why many wealthy choose to just spend it instead!

Are Younger Generations Coachable With Money?

The desire to influence future generations is nothing new. How these conversations play out, however, will dictate the flow of what will probably be the greatest wealth transfer in New Zealand history.

On top of the difficult social and cultural gaps between generations, there’s the age-old roadblock of awkwardness – few people of any age want to talk about inheritances, which inevitably means talking about death. It can be a grim topic for anyone involved.

All this leads to the question: how can parents and their kids overcome these hurdles?

Family Philanthropy

One answer may be “family philanthropy,” a sort of gold-plated version of family therapy. Essentially, family philanthropy consists of children and parents deciding collectively on which organisations to bestow their wealth upon. The practice is a means to live and learn values within the family system and is a growing trend among wealthy families.

In practice, family philanthropy often takes the form of kids deciding which worthy causes, charities, and organisations will get their parents’ money.

For philanthropic parents who are worried about their kids becoming tight-fisted, it’s important to not just show, but show and tell. Talking to children about charity “has a greater impact on children’s giving than role-modelling alone” according to research done by the Women’s Philanthropy Institute at the Indiana University Lilly Family School of Philanthropy. (It also helps to have daughters, who are more likely to mimic their parents’ giving habits than sons, according to the study).

“Having the conversation and talking about giving is hugely important,” says Jacqueline Ackerman, Associate Director of the Women’s Philanthropy Institute. “Kids are not just often going to pick up what their parents are doing with their money. When parents talk about their giving, the kids are much more likely to be generous.”

Kiwis Are a Generous Lot

To be sure, the giving habits and problems of multi-millionaires’ may seem trivial to people with regular-sized paychecks. However, this matter might relate to charity more than anything else. What millionaires’ kids decide to do with their inheritances will shape the future of charitable organisations for years to come, particularly as growing inequality could result in a diminishing pool of donors for New Zealand’s 27,800 registered charities.

Exact data on how generous we are as a country is hard to come by, though New Zealand was ranked fourth most generous in a recent Charities Aid Foundation world "giving index", outranked only by Australia, the United States, and Myanmar, a devoutly Buddhist country where giving is ingrained to support a monastic lifestyle. It’s also difficult to identify the source of the largest donations or gifts in New Zealand because so many are given anonymously.

The Bottom Line: Passing on Wealth

Having the power to improve the lives of others is, to many people, a privilege, and one that comes with its own sense of obligation. Acting on these powerful feelings of responsibility is a great way to reinforce our own personal values and feel like we’re living in a way that is true to our own ethical beliefs.

The decision to leave an inheritance to your children or not will differ for every family and can be based on any number of factors. In general, leaving an inheritance to your children is good in that it helps them through life, eases their financial burden, might represent your love and care to them, and shows that you did well enough in life financially to be able to leave something to your family.

Equally, giving to charitable causes can help with a sense of moral duty to help others, to meet a sense of obligation. For some, this is rooted in personal values and principles.

It’d be the pleasure of one of our trained professionals to help you work through anything mentioned above, book a complimentary initial consultation to learn more.