Money is not the only thing you leave to your heirs

13 September 2019

Without passion, you don’t have energy. Without energy, you have nothing.

—Warren Buffett

So many of us are passionate about investing. We spend a lot of time and energy trying to figure out the best way to maximise our returns and make the best use of the spare capital we have. However, investing forms only a small part of the wealth management equation. Wealth transfer (or “legacy planning”) is also important.

The term “legacy planning” is used so often nowadays that we might not give it much thought. Insurance companies, banks, asset managers, and even the media all quote it to try to get you to act, hopefully by buying something they are selling.

For most people, legacy planning is simply a way to pass on your physical assets to your heirs. Most do not realise that one of the most valuable things you can pass on to your heirs is a right value system. Yet this is something we are constantly doing, even without realising it. What is your living legacy? What values are you imparting to your children? What financial values are they learning from you?

If you have children, you may wish to think about what you would like them to know about money and how to make responsible financial decisions. It could be a useful teaching tool to share your own mistakes and successes over the years. Many of those lessons will leave a long-lasting impact on their lives, perhaps even after the physical assets have been used up.

Teach your loved ones how you invest, and own up to your mistakes

Money is a seemingly taboo subject in many families and societies. Parents may not want to disclose their wealth to their kids out of fear that they may grow complacent, become lazy and take everything for granted. As such, family discussions on finance may not move beyond basic lessons on spending or saving wisely.

However, if you want to take those discussions further, here are some talking points that you can use:

1. What investment mistakes did you make in the past? How did that impact you, both from a financial and emotional standpoint?
2. What investment successes did you have? Were they due to luck or skill?
3. When did you start to invest? Were you focused purely on making money, or did you have some future benefit or goal in mind?
4. How did you navigate the different market environments – high/low interest rate environments, market collapses, surging prices?
5. What did you look for when working with an adviser, investment manager or banker? How did that relationship turn out for you?

There are many more topics along these lines, but the key idea is to share your experiences to help the younger generation avoid the same mistakes you made.

Set an example for saving and spending

You’ve saved and invested your whole life so that you can enjoy the fruits of your labour when you finally stop working. Don’t forget to enjoy the lifestyle you desired when you were younger! Conversely, you also don’t want to have to keep working until your twilight years because you enjoyed life a little too much when you were able-bodied.

Setting a good example to the younger generation doesn’t mean having to impose strict spending habits or forcing them to save everything. There needs to be a good balance between enjoying your life while saving towards a future goal. Identifying your values, what makes you truly happy, and what you want to achieve in 10, 20 or 30 years will help you decide how much you want to put aside to invest.

Encourage your loved ones to contribute to worthy causes

Some of the most fulfilling experiences that people remember aren’t that extravagant trip around the world or purchasing an expensive sports car. Instead, they were the times when they were able to help others in need. Instilling in your children a desire to give and serve the less fortunate is extremely important in helping them grow into responsible, compassionate adults.

Find a cause that you and your family believe in – whether it is the Children’s Cancer Society, or a help group for the needy linked to a local religious association. See what opportunities they have for volunteering, or decide as a family how much you’d like to set aside for donations. Not only would this help to expand your and your loved ones’ life experiences, you’ll also get to teach your children that life isn’t just about money. They will learn to cherish and be thankful for all the things that they have, and find joy in sharing those blessings with others.

Don’t forget about a healthy lifestyle!

Research shows that a healthy lifestyle (which includes exercise, of course) not only helps your body when dealing with illness, it also helps your mental well being. Encouraging such a lifestyle also has the additional benefit of helping you better manage your healthcare costs in the future. (Medical inflation has been hovering around 10% per year for the last few years). This means that not only would improving your health help you get stronger both physically and mentally, it could also help ease your future financial burdens.

So, what would you want your legacy to be? What would you want the people around you to remember you for? Legacy planning is not only about bestowing them with your wealth. What is equally important is leaving a positive and lasting impact on their lives.

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