Banking on an inheritance
The biggest intergenerational wealth transfer in history is underway
What’s The Great Wealth Transfer?
Over the next 20 years, an estimated $22 trillion will transfer to the next generation in Canada, with $70 trillion changing hands in the US.
A recent study from Vanguard Canada found that many younger Canadians are counting on “The Great Wealth Transfer” to meet their financial goals. But they may be in for a surprise.
57% of investors under 35 expect to receive an inheritance
Yet 31% of older Canadians aren’t sure if they’ll leave one at all
Why the disconnect?
According to Vanguard, “Canadians of both generations, from boomers to millennials, are feeling the pressure of inflation and the rising cost of living, and this impacts the transfer of wealth.”
34% of those aged 18-34 say than an inheritance will be crucial to meeting their goals
Meanwhile, investors 55+ are concerned about needing their assets later in life for unexpected healthcare costs, prolonged retirement needs, and the rising cost of living
What are the consequences?
Wealth transfer planning is often not a priority
One-quarter of all respondents over the age of 55 have no plan for transferring wealth
Only 32% of Canadians with a financial plan include wealth transfer in those plans, potentially leading to unmet expectations for the Next Gen
How can you bridge the expectation-reality gap?
✅ Make The Wisest Investment
Teach the next generation to be responsible, independent and money-smart for life to reduce overreliance on an inheritance that many never come. And if one does? They will be prepared to be good stewards of wealth.
✅ Plan early and often
Include estate planning in your overall financial plan and talk about it with your adult children. With the help of a financial advisor, having regular family meetings and open conversations may prevent misalignment and financial surprises.
✅ Follow Warren Buffett’s advice
Whether you have “modest or staggering wealth”, Warren Buffett recommends that you let your adult children read your will before you sign it. This ensure they understand both the logic of your decisions and the responsibilities they will encounter upon your death.
Media Corner
If you’re into personal finance, I think you’ll enjoy Rob Carrick’s final column at The Globe and Mail, where he recently retired after almost three decades. Eight lessons learned in 27 years of covering personal finance and investing.
As Canada grows into a cashless society, figuring out your child’s options for electronic payment is key. I enjoyed being interviewed for this article: Are your kids too young for credit cards but too old for piggy banks? Here’s how to help them navigate a cashless world.
Crash diets are extreme and unhealthy, but the financial version might actually make sense. I “weighed in”: Want to crush your debt? Financial experts suggest trying a money crash diet
Coming up!
The summer has been wonderful and it’s going by fast! But when it ends, I’ll be looking forward to speaking at the Minerva Summit, hosted by Burgundy Asset Management, on September 18. Minerva is Women of Burgundy’s flagship event (and annual publication) and this year’s summit will focus on The Inheritance Economy. Stay tuned for more details.
