Leaving A Financial Legacy

When we talk about leaving a legacy, most people think about leaving an inheritance like property, money, stocks or even a business for the next generation. That is good intention and if you have the means to do it, then do it. Others think that leaving too much for their children is not good and give most of their money away.

What I would like to talk about is not something tangible like properties and so forth. I think that it is good to leave something for my children, when I have children for the simple reason that they don’t have to have it so tough. Things are getting expensive if you live in the city and will become more so in the future. Yet income trends shows that it has not grown as fast as inflation. If you can leave something behind for your children, they would have a better start, although that is not guaranteed.

When I talk about leaving a financial legacy, my thoughts are the financial values you are going to pass on to your children. It does not matter if you leave them with millions, but if they don’t have the right values, those millions will be gone in no time. In fact the Chinese people have a saying that prosperity does not remain in a family for more that 3 generations. It story goes like this. The first generation is poor, lack opportunity where they were living, probably immigrated from China or elsewhere. They saw the opportunity the new land presents, works hard, is frugal, saves and lays a financial foundation. This foundation is most likely a small family business, some money and/or small piece of land. The second generation saw their parents work hard. They caught the values of their parent, are thrifty, builds on this first foundation to take it to the next level. Perhaps they have a better education, come back from getting a college degree, modernize the business and they become wealthy in the process. The third knows nothing of the first generation work. They only see the wealth the second generation got. The nice house, nice cars and pretty good lifestyle. This third generation enjoys the fruit of the labor of the first 2 generation. They don’t know the hardship of their grandparents to build the business because they did not see. Laziness sets in and they only know how to consume rather than to preserve and grow the wealth further. By the time the fourth generation comes along, a large portion of assets are consumed or wasted. Fifth generation comes along, they are back to square one. All the wealth and experience down the drain.

If you have children, you know how fast children catch on to something. In a funny sense, they mimic what the adults do. The way they talk, the way they relate to one another and they spend money. This should come as no surprise. Children catches the money values of the parents. If you eat at expensive restaurants most of the time, they become used to eating at expense restaurants. They will do the same when they grow up. If you change cars every year or two, they would most likely do the same. If you are in a mountain of consumer debt, most likely they would be too. And even if you don’t carry a debt to live the lifestyle you currently live, you have trained your children to live at a certain level, they will live at a similar lifestyle even if they had to be in debt to do so.. Because that’s how we have been living all these years. I know there are exceptions. There is always the exception to the rule. But that’s how it is.

So, what financial legacy are you leaving your children in? Are you leaving a financial legacy that can last more than 3 generation? It depends on you. If you even needed a strong reason to make-over your financial life, this would be a good one.

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