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Seven ways to get the next generation ready for wealth



Wealth should bring opportunity, not conflict. Read our tips for maintaining family harmony while managing your finances.

2 min read

Families are usually as keen to maintain family harmony as they are their financial capital. But such outcomes are rarely down to luck.

Growing up in a wealthy family opens up a multitude of opportunities, from financial security to education and exciting career paths. But wealth can also impose particular responsibilities. The next generation may be spoilt for choice in terms of job options, but the lack of a financial need to motivate them may leave some drifting. Others may feel under pressure to fill their parents’ shoes or they may grow up with little experience of overcoming adversity.

Over the next 20 years some £1trn in wealth is expected to be passed down from one generation to the next. Preparing children for the opportunities and responsibilities wealth can bring is a journey rather than a single event. Phasing the development of the rising generation over several years can help them deal with their inheritance positively – financially, socially and emotionally. You can start at any age, although in our view the earlier the better.

While there is no one winning formula, in our experience there are common elements that help make the journey a success. We’ve boiled these down to seven key factors to consider when planning for the future.

1. See the big picture

Families that do well tend to view their wealth as more than financial capital. They develop the abilities (human capital) and emotional intelligence (emotional capital) of family members and often engage with the community in a variety of ways from volunteering to philanthropy (social capital).

2. It's good to talk

Families may avoid talking about wealth for many reasons, but lack of communication can damage family trust and harmony, as well as the wealth itself. Discussions about your values, hopes and fears, and developing a shared plan for the future, can bring families closer together and allay concerns. Shared values act as the glue in a family and as a guide in decision-making.

3. Have a clear vision

Establishing a vision for your wealth, including its meaning and purpose, is the foundation of successful succession. Do you want the family wealth to last for a single generation or multiple generations, for example? Should the money be used for basic needs, such as education, health and housing, or spent freely?

“Preparing children for the opportunities and responsibilities wealth can bring is a journey rather than a single event.”

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4. Walk the walk

As much as talking through your values and expectations is important, your behaviours will either underline or undermine these points. For instance, if you are trying to instil frugal values, buying first class flights may confuse children. Conversely, witnessing parents’ stress over the family business might colour the next generation’s attitudes to working there. There are no right or wrong attitudes towards wealth but your behaviour should ideally showcase the values you want to pass on.

5. Practice makes perfect

Children learn about wealth and money from their experiences, the people around them and the media. Having opportunities to practice money management appropriately from an early age can teach children about concepts like saving, spending, earning and giving.

6. Learn from mistakes

It’s also important to allow children to make and learn from mistakes. This builds knowledge, resilience and good judgement. It can be invaluable to have the opportunity to be independent and to sometimes make the wrong choices, but still have the family’s support.

7. Add structure

At a practical level, having a family wealth structure and emergency plan can help allay anxieties if the worst should happen. This includes wills, trusts and other vehicles but can also involve developing a family charter or distribution policy that acts as the family’s guidebook for decision-making.

This article draws on our briefing paper ‘Preparing the rising generation’. For a copy, please contact your private banker.

Key Takeaways

Wealth brings great opportunities but also responsibilities for the next generation. Taking the time to think about your values and share them with your family will help lay a sound foundation for their future.

About Coutts Institute

We understand that wealth means more than money. The Coutts Institute focuses on the governance of wealth - helping family businesses succeed, helping clients fulfil ambitions for their philanthropy, and preparing the next generation for inheritance.

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