For the most part (unless you win the lottery), wealth doesn’t just happen overnight. You’re likely investing a lot of time and effort into reaching your financial goals. So how do you instill a similar work ethic into your kids?
You’re not alone if you’re worried about handing the purse strings to the next generation. A recent BMO Wealth Institute report revealed that 51% of Canadians are concerned that their family’s financial well-being would be at risk should they pass away. And no wonder: About $1-trillion in family wealth is expected to be transferred over the next 20 years, according to a BMO InvestorLine study. Perhaps you’re also concerned your kids will lack responsibility, a fear fueled by media stories about affluenza, which supposedly afflicts youth who have been too coddled by their parents.
While some might consider leaving their fortunes to charity rather than children (Warren Buffet comes to mind), that’s not a likely outcome in the majority of cases. An alternative might be to use philanthropy as a platform to teach and empower younger generations. Not only can giving back to others teach your kids to manage their wealth effectively, it can also instill important characteristics — among them, empathy, generosity and community-mindedness.
But how do you encourage this to happen? Fortunately, there’s really no right or wrong way to give. It can be driven by not only how much you can donate, but also your interests and passions. What matters most is that you include your younger family members from the outset, particularly when determining the cause. Here are four tips to help you make the right decision — for all of you:
- Decide together: It can be as easy as carving out an hour to sit down and talk about the causes that are important to each member of your family. Perhaps it’s homelessness, the environment, the arts or something else entirely. Find common ground and identify two or three charities that are actively addressing the issues you are passionate about as a group.
- Do your research: Before you agree on a shortlist of charities, you may want to engage in some preliminary research. It will be important that you’re ethically and ideologically aligned with your charity of choice. You may also want to look into what percentage of your donation will go directly to the cause, as this can vary significantly depending on a non-profit’s overhead and personnel costs.
- Plan a visit: If possible, plan a family visit to each of the organizations over the ensuing weeks. Then, come together to discuss your impressions of each non-profit and decide which one or more you want to financially support, as well as how your charitable dollars will be allocated.
- Volunteer: Whether donating a weekend to work on a Habitat for Humanity project or spending an afternoon stocking shelves at a local soup kitchen, volunteering is beneficial not just for society, but also for you and your kids. Among other benefits, it can improve your emotional and physical health, as well as create a deeper connection to others.