Children from wealthy families are often ill-informed on how to handle their large inheritances and are likely to squander their parents’ money, say experts.
According to the Williams Group wealth consultancy, 70% of extremely affluent families lose their wealth by the second generation, and 90% lose theirs by the third generation.
When Chris Taylor of the Toronto Sun asked financial planners how second and third generations were able to squander their handed-down wealth, the answers were quite blunt:
“Most of them have no clue as to the value of money or how to handle it.”
“Generation Threes are usually doomed.”
“It takes the average recipient of an inheritance 19 days until they buy a new car.”
The U.S. Trust recently conducted a survey of high-net individuals who possess more than $3 million in assets and asked them how they were preparing the next generation to handle the insane amount of wealth they are to inherit. Chris Heilmann, the chief fiduciary executive of the U.S. Trust reports,
“Looking at the numbers 78% feel the next generation is not financially responsible enough to handle inheritance.”
Surprisingly enough, 64% of those surveyed admitted that they have said little to nothing about their wealth to their children because they worried their children will become lazy and entitled or they feared such information wouldn’t be kept private.
It seems like now is the perfect time to spend that money and hire a financial planner.