By Adam Deal
We find ourselves on the cusp of the largest wealth transfer event in history as baby-boomers begin to see their wealth passed down to the millennial generation. It’s estimated 45 million households in the U.S. will transfer $68 trillion of wealth over the next 25 years, according to CNBC. Not surprisingly, a number of our clients are apprehensive about the actual transfer of their wealth. The resounding reason is a perceived lack of financial responsibility, the thought that money may “change” someone or the idea that managing family wealth could be burdensome.

The financial crisis of 2008/2009 has had a lasting impact on millennials. For the older millennial, they watched the financial markets crumble and tried to find employment in a rather depressing job market.  These reasons, among others, made it difficult to accumulate any material savings causing a sense of financial uncertainty.  That uncertainty caused them to postpone traditional next steps – moving from their parents’ homes, getting married, having kids, etc. Conversely, the younger millennial experienced almost the opposite. They entered the work force when the employment landscape was improving, experienced a resurgent financial market and improving economic picture. They learned what not to do by watching the crisis unfold, not actually living it. Same generation – different financial viewpoints.

So how do you prepare your millennial to take the financial reigns at some point? It starts with an open dialogue and a desire to understand the views of the next generation. Here are a few key areas to focus on that should be helpful.

Promote the Basics of Financial Responsibility

  • Budgeting – Your kids probably don’t know what it takes to run their lifestyle. Take the time to help them put together a list of their income and expenses. If their expenses outpace their income, talk about wants versus needs. Instilling the need to keep a balanced budget will go a long way.
  • Taking Advantage of Employer Retirement Plans – Contributions to employer sponsored plans serves a dual purpose. Contributions are pretax, and it’s a wonderful savings mechanism. It’s money they get accustomed to not having each paycheck. Most employers also match contributions – free money!
  • Saving Versus Investing – Yes, there is a difference. Saving is merely putting money aside for something in the future. Investing is putting money to work in some fashion to generate long-term returns.
  • Establishing Credit – Millennials should establish credit early to make their car or home buying process easier. Consider co-signing on a low limit credit card to get them started. Equally important is for them to be prudent in managing their credit score.

Encourage Financial Planning

Most of you have probably embarked on a financial planning process of your own. You took the time to develop a savings strategy (e.g., college funding, second home, retirement, etc.), a prudent investment philosophy and worked with a professional to design and implement a sound estate plan that would ensure an efficient transfer of your wealth. In short, you set various goals and developed a process to achieve them. Your millennial should take your lead and develop their own plan. They’ll focus on saving for a home, getting on track early for retirement and potentially planning for a family of their own. Help them understand achieving any financial goal is significantly easier when there’s a well-designed plan in place.

Involve Your Millennial in the Investment Dialogue

The investment component of the wealth picture is arguably the most important. Investment philosophies of baby boomers compared to millennials will look drastically different. Mutual involvement in the investment dialogue will help you both get a better understanding for one another’s philosophy. Be sure to include your investment advisor to help provide education on the markets that your millennial will appreciate.

Engage in Philanthropic Conversations

Many wealthy families are charitably inclined. They donate at varying levels to any number of charities.  Oftentimes, the charitable organizations are near and dear to the parent’s heart, not the kids. Consider carving out a portion of your funds for giving to support one or two organizations they believe in. If they can’t identify a specific charity, discuss some of the things they care about and help them find an organization to support. Make sure they aren’t just financial givers but also givers of their time. That could be another part of your legacy!

Foster a Relationship with Your Trusted Advisors

Ensuring your millennial has a relationship with your trusted advisors is important. These relationships are arguably some of the most important you can pass on to them. Typically, your BB&T Wealth team, CPA, estate planning attorney and select others make up your trusted advisory team. When appropriate (the earlier the better), include your millennial in meetings with your advisors. Having them see you working with the people you’ve trusted to guide you through various financial matters will be meaningful. It’ll give them a chance to learn about the decisions they will one day make and the potential impact of those decisions. As time progresses, involve them in the actual decision-making process. Giving them this kind of exposure will empower them to make the right decisions when they’re at the helm.

The task of efficiently transferring both your legacy and your wealth can look daunting, and you may be struggling with where to start. Conversation is key, and it doesn’t have to be rooted solely in numbers.  Be sure you spend time talking about your values, the things that made you successful and your hopes for your millennial. Remember, they’re growing up in a different world than you did.

Starting with the basics and building from there should create a pathway of mutual success for you and the next generation. Planning is key and will make the execution so much easier. Good Luck!

Adam W. Deal

Adam W. Deal

Senior Vice President

Adam is a Wealth advisor located in Washington, D.C. dedicated to providing strategic advice and customized solutions to his clients. He joined BB&T in 2007 by way of BB&T’s Leadership Development program.  Adam earned his M.B.A. in Finance and his B.A. in Trust and Investment Management from Campbell University.