SHARE YOUR WEALTH HOW TO GIVE YOUR KIDS A FINANCIAL LEG-UP
OVERVIEW DARREN SNYDER
Over the next two decades, an estimated $3.5 trillion will be transferred between generations in Australia, according to McCrindle research. The figure, first published in 2016, has led many commentators to question how up-and-coming generations will handle this massive wealth opportunity.
The pool of money will unquestionably be a welcome addition, helping people experience greater financial independence, whether it is now or in their retirement. What must also be considered though, is the kind of lifestyle we want to pass on.
In our feature "Baby steps for new parents" (page 44) we point out that, at a minimum, it takes $300,000 for two parents to raise two children up to the age of 17. Now in our cover story we look at what financial habits we should create for our kids, and warn that mum and dad will need some cash in reserve when they become the bank of choice for their children – the fifth largest lender in the country and growing, according to comparison website Mozo.
When you listen to the experts and governments you can imagine our super system growing to more than $9 trillion, or triple the size it is today, in the next 20 years. Research also tells us that Australia will have more than two million millionaires by 2024. On the surface it paints a rosy picture of our future wealth. However, if Covid-19 has taught us anything, it’s that nothing is certain. It’s an uncertainty that understandably has us worried about our futures and whether we’ll be financially secure. Even before the pandemic hit our shores, countless studies tell us that money worries were common.
There’s the Perpetual research from December 2019, which says more than two-thirds of Aussies (76%) don’t have a will and 53% of parents have not discussed their will and legacy with their children. Yet about 60% of parents in the same survey hoped their children would use their inheritance wisely.
It also estimates that 70% of families will lose their wealth by the second generation and 90% will lose it by the third. It’s no wonder that we’re worried about our financial futures.
Scrolling through the hundreds of money questions we receive every month confirms to us that these fears are genuine. One common theme to these questions is how and where to distribute wealth for future generations. Of course, the question is never expressed in those exact words. It can be about where to invest your inheritance or how to best save for
