Educating the Next Generation Without Handing Over the Keys Too Early

You have spent years building your wealth. You have saved, invested, and made sacrifices so your family can enjoy a more comfortable life. It makes sense that you want your children and grandchildren to benefit from what you have built.Here is the challenge. Handing over wealth without handing over the knowledge to manage it can do more harm than good. Research from the Williams Group, based on its advisory experience with affluent families, found that 70% of wealthy families lose their wealth by the second generation and 90% by the third. That is a staggering number. The good news is that it does not have to be your family's story.

The key is educating the next generation about money before they inherit it. Think of it like teaching a teenager to drive. You don’t just toss them the car keys and hope for the best. You ride along, explain the rules, and let them practice in a parking lot before they hit the highway.

Start the Conversation Early

One of the biggest mistakes families make is waiting too long to talk about money. Many parents avoid the subject entirely, either because it feels awkward or because they worry it will spoil their kids. Research led by Professor Annamaria Lusardi and colleagues, affiliated with the Global Financial Literacy Excellence Center, estimates that low financial literacy costs Americans an estimated $390 billion a year. That number should get your attention.

You don’t need to share every detail of your net worth. You can start small. Talk about what things cost at the grocery store. Explain how a savings account works. Let your children see you make thoughtful spending decisions. These little moments add up over time and lay the groundwork for bigger conversations down the road.

Make it Hands-On

Kids learn best by doing, not just listening. One effective approach is giving children an allowance. According to Joline Godfrey, author of Raising Financially Fit Kids, allowance should never be tied to routine chores — those are family obligations, not paid work. Instead, she argues that allowance functions as a practice tool for managing money, while kids can earn extra cash for special jobs, like weeding the flowerbeds or reorganizing closets, that go beyond their normal responsibilities. This teaches them that money is earned, not just given. It also creates natural teaching moments about saving, spending, and sharing.

For older children and young adults, consider opening a custodial account, such as a UGMA or UTMA. These accounts let you invest on a child's behalf while they are still a minor. As the custodian, you control the account and make the investment decisions. This gives you a chance to walk your child through what you are doing and why. You can show them account statements, explain how different investments work, and talk about the ups and downs of the market in real time.

It is important to understand that assets in a UGMA or UTMA legally belong to the child. Once the child reaches the age of majority, which varies by state, full control of the account transfers to them.

The point is to get them comfortable with financial concepts before they are responsible for managing real money.

Hold Family Financial Meetings

This might sound formal, but it does not have to be. A family financial meeting can be as simple as sitting around the kitchen table once or twice a year to talk about your family's values around money. What matters most to your family? Is it education? Giving back to the community? Building something that lasts?

Fidelity’s research on family wealth transfer has found that communication gaps between generations are common and that open dialogue can play an important role in preparing heirs for financial responsibility. Families who do this well tend to raise children who feel better prepared and more confident about handling money.

These conversations shouldn’t just be about dollars and cents. They should also cover your wishes for how the family's wealth is used. Do you want to fund education? Support a family business? Leave a charitable legacy? Sharing your intentions now helps avoid confusion and conflict later.

Use Guardrails, Not Roadblocks

Trusts are one of the most effective tools for educating and protecting the next generation. A well-designed trust lets you provide for your children while setting clear guidelines for how and when they receive money.

You might structure a trust so that distributions are tied to milestones like graduating from college, starting a business, or reaching a certain age. This approach encourages responsible behavior. It is a way of saying, "I believe in you, and I want to give you every chance to succeed."

As an article in Kiplinger Magazine noted, preparing children for wealth works best when you treat it like an internship, gradually increasing their responsibilities over time. This allows young people to learn wealth management in stages rather than being overwhelmed by a large inheritance all at once.

Lead By Example

Your children will learn more from watching you than from anything you tell them. If they see you living within your means, giving generously, and making thoughtful financial decisions, those habits tend to stick.

If money is never discussed and financial decisions happen behind closed doors, your children may never develop the skills they need.

Your financial advisor can be a valuable partner in this process. We are happy to include adult children in meetings, walk them through the basics of investing, or help facilitate those sometimes-difficult family conversations about money and the future.

The Bottom Line

Passing on wealth is about more than writing a check or naming someone in your will. It’s about passing on the knowledge, values, and habits that will help your family thrive for generations to come.

The best inheritance you can give your family isn’t money. It is the wisdom to use it well.

‍

Seneschal Advisors, LLC DBA Seneschal Family Office is a Registered Investment Advisor registered with the Securities and Exchange Commission (SEC). Registration as an investment adviser does not imply a certain level of skill or training, and the content of this communication has not been approved or verified by the United States Securities and Exchange Commission or by any state securities authority.

The information contained in this material is intended to provide general information about Seneschal Advisors, LLC DBA Seneschal Family Office and its services. It is not intended to offer investment advice. Investment advice will only be given after a client engages our services by executing the appropriate investment services agreement. Information regarding investment products and services is provided solely for informational purposes, including our investment philosophy and strategies. You should not rely on any information provided on our website in making investment decisions.

Market data, articles, and other content in this material are based on generally available information and are believed to be reliable. Seneschal Advisors, LLC DBA Seneschal Family Office does not guarantee the accuracy of the information contained in this material.

Our content may, from time to time, provide references or “links” to other websites as a convenience to users. The inclusion of any link is not an endorsement of any products or services by Seneschal Advisors, LLC DBA Seneschal Family Office. All links have been provided only as a convenience. These include links to websites operated by other government agencies, nonprofit organizations, and private businesses. When you use one of these links, you are no longer on this site, and this Privacy Notice will not apply. When you link to another website, you are subject to the privacy policy of that new site.

When you follow a link to one of these sites neither Seneschal Advisors, LLC DBA Seneschal Family Office, nor any agency, officer, or employee of Seneschal Advisors, LLC DBA Seneschal Family Office, warrants the accuracy, reliability or timeliness of any information published by these external sites, nor endorses any content, viewpoints, products, or services linked from these systems, and cannot be held liable for any losses caused by reliance on the accuracy, reliability or timeliness of their information. Portions of such information may be incorrect or not current. Any person or entity that relies on any information obtained from these systems does so at their own risk.