Young adults of means often have different financial concerns than previous generations. These strategies can help set the stage for ongoing success.
While the next generation of individuals rises up to become beneficiaries and stewards of the family’s wealth, they bring with them fresh perspective. “If you are a member of the Rising Gen, you likely have a different financial outlook than those who came before you,” says Ginni Galicinao, a lead family dynamics specialist with Wells Fargo Wealth & Investment Management.
“As a young adult who may not need to work for a living, possibly due to access to family money, you often have different financial concerns than other individuals your age,” adds Gary Shunk, also a lead family dynamics specialist with Wells Fargo Wealth & Investment Management.
“You may also be considering life-changing moves,” adds Galicinao. “You might be starting a new career or thinking of joining the family business. You may also be getting seriously involved in philanthropy and learning to become responsible stewards of your family’s investments and property.”
Regardless of those moves, Shunk and Galicinao believe that members of the Rising Gen often have consistent overall goals: To learn about the origin of the family wealth and its meaning, to honor and expand the family’s legacy, and to preserve and grow the family’s wealth. Here, Shunk and Galicinao offer suggestions for 20- and 30-somethings and their families to help further define what your financial success might look like — and how to get there.
1. Don’t ignore your wealth. “Some of the Rising Gen may feel guilty or embarrassed about their inheritance as they did not earn it,” Shunk says. “This can create an unwanted and unnecessary conflict for the heir that needs to be properly addressed, understood, and reconciled.”
Galicinao notes that she often finds young heirs wanting to be just like their peers. “They want to be able to have the same kind of conversations and concerns around money that their friends have. For instance, ‘I’m saving money to buy a car.’ Or ‘I’m saving to afford a ski pass.’ Or ‘How much did you get from your tax return this year?’”
“The earlier you and your family talk about what it means to be part of a family of significant wealth, the more time you have to become a good steward of the family’s wealth,” notes Galicinao. “Even if that means simply creating a budget and figuring out what it costs to live the way you want to live, that’s an important step. It’s very empowering to start managing your own money — even before you come into your full inheritance.”
Ignoring wealth planning until later in life can be a mistake: It removes potentially the opportunity for you to learn early how your money can grow and to explore situations where it might be able to make a difference not only for yourself, but for others.
2. Consider your philanthropic goals and impact. Perhaps more so than the previous generations, the Rising Gen feels strongly about making an impact in society, and they’re not waiting until they’re out of their 20s and 30s. “You might even start a nonprofit organization along with making large financial gifts to support causes important to you,” Shunk says.
If you’re receiving an inheritance and your family runs a nonprofit or foundation, consider asking to be a part of that organization to learn how decisions are made and where money is spent and invested.
Galicinao’s note to senior members of the family: “Older generations should keep in mind that younger generations may focus on different issues,” she says. “Examples might include climate change, social justice, alternative energy, and social impact investing.”
Communicating openly about issues that matter to everyone enables family members to learn more about each other and understand each other’s differences, thus enhancing communication across generations.
3. Get ready to take on responsibility. It takes awareness and preparation to step into bigger roles managing aspects of family wealth, such as the family’s business, investments, or donations.
Families who seem to be more successful in setting up the next generation for wealth, says Galicinao, approach this exposure gradually and mindfully. The news “By the way, we’re rich” should not be sprung on the Rising Gen all at once. Learning the meaning, impact, and intention behind the family’s wealth takes time. When parents and grandparents gradually reveal details in stages about the family’s net worth and how much each heir may inherit, the Rising Gen feels part of the story and more prepared for stewardship.
“Early education and engagement is key for younger family members who will receive an inheritance. You will benefit from being part of regular discussions about the family’s financial and philanthropic goals,” says Galicinao. This is your chance to ask questions and learn more as you develop money awareness and confidence.
4. Develop financial experience. Your family’s wealth and financial advisors can help serve as a guide with developing an investment plan and the lessons it can teach. “This hands-on experience is a great way to help the younger generation familiarize themselves with investing and wealth preservation,” says Shunk. Are you interested in socially responsible or ESG (environmental, social, and governance) investing? This is a great time to learn how it works.
5. Communicate, communicate, communicate. Galicinao notes, “In Wells Fargo’s 2019 Children of Wealth: What Matters Most study, we found that young adults are hungry for regular family meetings with their parents and advisors. To get started, we recommend that families work with their family dynamics strategist and wealth advisor, who can design and facilitate meaningful get-togethers and even coordinate money-education components for the Rising Gen.”
“Good communication can also help ensure that wealth isn’t quickly depleted,” she says. Believe it or not, research has shown that 90% of wealthy families go from “shirtsleeves to shirtsleeves” (back to their hardworking, financially modest roots) within three generations, and 70% within two generations. “In our experience, the primary reason for the loss of a family wealth is due to a breakdown of communication and trust among family members,” says Galicinao.
Need ideas on how you and your family can become successful partners in building your financial legacy? Your advisors at Wells Fargo Wealth & Investment Management will be glad to help you plan.
Wells Fargo Wealth & Investment Management (WIM) is a division within Wells Fargo & Company. WIM provides financial products and services through various bank and brokerage affiliates of Wells Fargo & Company.