Six tips for engaging your family’s next generation in financial planning

Following a weekend with family or the extended separation due to lockdown, you might have thought about the legacy you’d like to leave your children and grandchildren. But making sure they’re engaged with their finances is just as valuable as an inheritance.

In the wake of the Covid19 fallout, over two thirds of millennials have seen their incomes reduced during the pandemic, research from the Office for National Statistics has found.

More than 100,000 people in 50 countries were asked about how Covid-19 has affected their lives. Researchers found that 56 per cent have seen their incomes reduced, with a higher proportion of younger people affected than older people.

Millennials were the hardest hit group, with 68 per cent seeing their income fall, followed by those born from the late Nineties onwards, known as Generation Z (65 per cent).

Notwithstanding the impact of Covid19, misconceptions about finances are rife, a nationwide survey by The Wisdom Council has found. With a lack of financial education, younger generations are shunning financial planning that looks beyond the short term. Considering the struggles of getting on the property ladder and salaries failing to keep pace with inflation, it’s perhaps unsurprising that many younger people aren’t thinking too far into the future.

But a lack of awareness and understanding could mean many are missing opportunities to secure their finances. The survey focussed on Generation X and Millennials found:

• Across all generations, only one in five recognise tax relief as a feature of Workplace Pension schemes
• 40% of millennials think they have a Defined Benefit scheme; figures from the Office of National Statistics suggest the figure is less than 20%
• One in four millennials don’t have a pension; a further 10% don’t know if they do
• 40% of women and 25% of men don’t have any investments
• The value of taking greater risk for larger returns is understood by around half of people

A lack of understanding could be hampering financial security. But the good news is that younger generations are keen to learn.

With children and grandchildren willing to learn about finances, from pensions to investments, passing on your knowledge can be beneficial. Finance can be a difficult subject though. If you’re looking for ways to engage, these six starting points can help:

1. Make it part of the conversation: Finance features heavily in the news. As a result, making it part of the conversation isn’t difficult. The challenge is balancing what’s in the media with information that’s useful. It’s typically the sensational stories that are covered in the press, from stock markets plunging to fraudsters getting their hands pensions. It can have a detrimental effect and put people off taking steps that could improve their security, such as building an investment portfolio. By discussing it you can help pass on correct information.
2. Show them the money: Being financially savvy means that finances go further. It’s an approach that can make talk of money far more interesting. Pointing out that paying into a Workplace Pension means their employer will contribute too plus tax relief shows why it’s beneficial. If grandchildren are saving for a deposit for their first home, pointing them in the direction of a Lifetime ISA or Help to Buy ISA can be useful too.
3. Relate money to their aspirations: You might be focussed on ensuring your wealth lasts you through your retirement years. But that’s unlikely to be a priority for younger generations. Whether they’re saving for university for a child or trying to pay off the mortgage quicker, you should relate finances back to their goals. It makes it relevant to their daily life and the challenges they’re facing.
4. Encourage them to look beyond the present: While some aspirations are in the not too distant future, others will be decades away. It’s important to remind them that while goals can seem a long way off, taking steps towards them now can make them more manageable. When you’re young you tend to focus on living in the here and now, driven by immediate rewards. Sometimes a bit of a reminder about why planning with the future in mind is all that’s needed.
5. Speak about your experiences: Over the years you’ve likely gained many financial experiences; good and bad. Sharing them with your loved ones can help them avoid the same mistakes or follow in your footsteps. Whether you achieved financial security by overpaying the mortgage, investing in stocks, or diligently putting away regular amounts, share what you’ve learned. Noting your mistakes lets the next generation know that it’s ok to mess up occasionally and it doesn’t have to mean instability.
6. Recommend a financial adviser: A financial adviser can help people of all ages; from when they enter the workforce right through to retirement. By taking an individual approach that focuses on personal goals, we can help clients achieve financial security. By assessing what their aspirations are and the most efficient way to achieve them in terms of finances, we can put together an actionable plan.

If you want your family to take a more active role in financial planning, we can help. Whether their goals are to secure a comfortable retirement or start a nest egg for a child, our services help align their finances with short, medium and long-term goals in mind.