A legacy is something handed down from one generation to the next. More than money or property, what kind of legacy do you want to leave?
The legacy you leave can be seen in terms of tangible and intangible things.
The tangibles
This is money, property and/or possessions, and is usually what is meant by intergenerational wealth. If you leave your children something valuable, like a house or a vehicle, it can give them a head start in life.
Education is also an example of a tangible legacy. Many families choose to spend their money on education rather than accumulating possessions.
A tangible financial legacy you don’t want to pass on to your children, is debt. Not only is it unfair to make your loved ones pay for your financial mistakes, but having to settle old debts could derail – or at least delay – the next generation’s journey to financial wellness.
The intangibles
Legacy also relates to the attitudes, skills and mindsets you pass on to the next generation. In terms of money, healthy money habits and an understanding of how to manage their finances, can be a more valuable legacy to leave your children than actual cash in the bank.
With tangible and intangible legacies in mind, here is a list of steps you can take to make sure your legacy brings joy and happiness.
Put a Will in place
When talking about leaving a legacy, we have to talk about a Will. At the most basic level, you must make things as easy as possible for your loved ones when you are no longer there. You don’t want to leave behind an administrative nightmare that costs family members time and money to sort out. Therefore, in thinking about the legacy you want to leave, start by making sure you have a Will and that it is valid and up to date.
Open tax-free savings accounts for your children
With a tax-free savings account in your child’s name, you can contribute every month to their future wellbeing. The longer a tax-free savings account is left to grow in value, the bigger the compound interest benefit – and it’s all tax free. Different to a life insurance policy, your child can take over the account once he or she becomes an adult and use the money to invest in the future.
Make sure your affairs are in order
For example, keep the beneficiaries of your policies up to date and regularly declutter your home. Put a file together with all your financial information and make sure your family members know where to find it.
Think about debt
Don’t let your children spend their adult lives trying to pay off the debt their parents incurred. Also, do what you can to give them a debt-free start in life. For most people, this means making provision for their children’s education so that they don’t have to struggle with student loans.
Model better financial behaviours
Breaking bad spending habits is extremely difficult, particularly when they are deeply engrained. Children observe not only what their parents say about money, but what they do with it. Therefore, make sure that the money habits they are exposed to, will set them up for financial success.
Teach them about money
When people inherit money, they can easily squander it if they don’t understand how to work with it. Therefore, prepare your children for the wealth they stand to inherit (no matter how much it is) by teaching them financial management skills from early on.
Provide for your children
This involves two big elements:
- Specify in your Will who your child or children’s guardians must be so that there is no confusion around who should take care of them when you are no longer there.
- Take out life insurance that will give your children (and their guardian) enough money for living expenses and an education. The value and terms of the policy will depend on your situation, but the goal is to ensure that if something were to happen, your children would be taken care of.
Giving children a head start in life is every parent’s dream. Make sure that the way you think about and manage the legacy you leave behind, serve your loved ones’ best interests.
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