The first time I ever had to face tryouts for a basketball team, I was cut. I was in the 7th grade, and middle school teams didn’t have different teams for different grade levels. There was one team. You either made it, or you didn’t. 

I can still remember going to school that day and waiting for the morning announcements. One by one, the names were read over the loudspeaker, but my name wasn’t called. That was tough. 

A funny thing happened later that day. The coach came up to me in PE class, and he asked me a question:

“Baker, would you be interested in being the manager for the team?” 

Every ounce of me wanted to say “No.” But, I told him that I’d think about it. I was still in my feelings about not making the team, but I didn’t want to express how disappointed I was about it. That night, I went home and told my parents about the offer. 

As the manager, I’d be on the same schedule for practices and games; but I would pretty much be the water/towel boy. It was not my ideal role. However, I decided that it would give me the chance to watch and learn. 

I couldn’t actually participate in practice, but I would be exposed to the same coaching. The same skills and drills were there for me to witness and take notes. I had a front row seat to learn as much as I could that year, so I took advantage. 

The next year, once again, I sat in my 8th grade homeroom, eagerly awaiting the morning announcements. No disappointments came my way in 8th grade. I took the lessons that I’d learned sitting on the sidelines and used them to help me make the team in 8th grade. 

This story has come to mean so much to me over the years. It may seem insignificant, but I realize that it was a turning point for me. It was the first time I realized that sometimes we are not fully prepared for the next level, so we must go through a season of refinement and preparation.

Preparing For Financial Independence

Full disclosure–I’m completely misusing the term “financial independence” as most of us would understand it. For the sake of this article, I’m referring to financial independence as the day that adult children no longer depend on their parents for financial support. This is a special day!

Many young adults in America have a failure to launch. According to data from Pew research released in 2019, it is believed that less than 25% of young adults are financially independent from their parents. I’m sure the pandemic of 2020 didn’t help this trend. 

How can parents today begin preparing their kids for financial independence?

The first thing that you must realize is that you are likely going to be the largest influence in your children’s lives when it comes to a relationship with money. Many of their very first memories, beliefs, and experiences with money will involve parents or family members. As parents, we have to own this responsibility. 

The second thing you must realize is that financial literacy is lacking in our nation. Despite some objections from those in the education field, our curriculum in schools is often found lacking when it comes to financial literacy. Look at this one excerpt from the Council for Economic Education’s 2020 survey of the states:

Data from Council of Economic Education 2020

Both of these data points are sad in that we are still acting as if financial literacy should be optional in our schools. Even worse, this data illustrates that it can be common for the poorest communities to have even less access to financial education. 

How can we engage children on the topic of money and generational wealth?  Being a parent is hard, and many of us have times where we doubt ourselves. I’m not here to condemn anyone, so please be encouraged! 

No matter what you believe about your own financial status, you can have a positive impact on your children’s learning in this area. Make financial literacy part of your family purpose or mission statement.

Here’s a brief list of ideas that can help you on your journey:

  • Engage with them! Kids are naturally very curious, and they ask tons of questions! Seize this opportunity to have conversations and answer their questions as openly and honestly as you can. Also, pay attention to the kinds of questions they ask! This will help you know more about how they are interpreting the world around them.

  • Find games that have financial themes that go with them. Monopoly is a classic example. You actually play with (fake) money. This is fun and engaging, and there are financial lessons that can be shared during the game.

  • Seek out financial books that can be given to them. Here’s a great example of some awesome books that mimic the style of Dr. Suess, but they are all about financial teaching.

  • Money touches everything. Even mundane trips to the grocery store can provide opportunities to talk about economic concepts like prices, saving, budgeting, and sales/discounts.

There are many opportunities given to us in our everyday lives. Our society has simply become too comfortable with the belief that money is taboo. We need more discussions about money, not less.

I’m not talking about money worship here. I’m talking about craftsmanship. Money is a tool. We need to embrace this truth and do our part to help our kids learn, even if this means they learn from our mistakes.

Preparing Heirs For Inheritance

This section may feel out of place, but guess what happens to our young children? If life takes its natural course, they become adults. The hope (and plan) is that they are equipped and prepared to fly from the nest and stand on their own.

What happens when generations of heirs who have poor financial skills inherit wealth?

I’ll give you my 3 best estimations based upon my experience as a financial planner:

  • The money is spent repairing a household balance sheet. They pay off student loans, credit card debt, and other liabilities.

  • The money is used to fund big “wants” like a new car or a luxurious trip.

  • The money is used to “catch-up” on financial goals like retirement or college funds for kids.

I’m not here to suggest that any of these are poor choices or bad outcomes. I’m very transparent in that I simply believe these kinds of decisions should be made in the context of a long-term financial plan. To me, the first step anyone inheriting property or generational wealth should consider taking is visiting with a financial planner or an investment advisor.

Let’s rewind for a moment…

I’ve been in hundreds of  pre-retirement meetings over the years as a financial advisor, and it’s quite common for these retirement questions to arise:

  • How much money will I need to retire?

  • When should I begin social security?

  • Will a bear market derail my retirement income plans?

  • Will I run out of money in retirement?

I bring up these questions because it is very rare for retirees to consider what they may leave as an inheritance to their children or beneficiaries. In fact, I’ve heard many people jokingly say that their kids “will be fine,” and there is “no plan” to adjust retirement lifestyle or an investment strategy in order to create an inheritance. No problem.

Consider for a moment that families that have been able to accumulate financial assets have the best chance (highest probability) of passing on an inheritance. If you’ve worked your entire life to grow your wealth by saving and spending wisely, investing prudently, and avoiding big financial mistakes; doesn’t it make sense to pass that wisdom on to the next generation?

I don’t mean to meddle in your family business, however, I’ve already told you that money conversations, especially about generational wealth, should not be taboo. We NEED to talk about money and remove the mystery. If not us, then who will influence our heirs?

My hope with this article is to plant a seed for consideration. By no means do I have all the answers, but I enjoy thinking and creating out loud. My follow-up to this piece will continue the conversation about how to prepare our heirs for generational wealth.