Baby boomers are expected to transfer $3 trillion to their Gen X & Y children over the next 15 years, with 75% of this cohort expected to receive over $110,000 [1].

Our previous article explored why dinner table discussions about inheritance can sometimes become awkward and emotional – but it is important for young Australians understand why these need to happen, and why seeking professional help might be a good idea.

Facing the facts

Most Australians want to utilise their nest egg to fund a comfortable retirement and provide financial security for their children long after they are gone. As children, how do you make the most of this opportunity to ensure an effective transfer of wealth to provide financial freedom for many generations?

Having discussions with your parents about money and understanding their views and perspectives is a great place to start. More than 60% of Australians stated that they were influenced by their parents’ attitudes towards money, and over 30% wished that their parents helped them understand financial matters better! [2].

Times are changing, and unlike the baby boomers, the Gen X & Y cohort face high levels of personal debt and rising living costs. It is expected that more than 80% of Australian millennials will be unable to fund their retirement. In a worst-case scenario, this number is expected to increase to 94% [1]. Additionally, rising property prices have meant that the bank of mum and dad is now one of the top 10 home lenders in Australia [3]. Having honest discussions with your parents about money and planning ahead will go a long way in managing expectations and avoiding conflict.

Inadequate planning can also negatively impact an area close to many – family businesses. While your parents may have spent their entire life building the business of their dreams, do you know how to carry on their legacy? Do you know how to take on the reins and build on the strong foundations they have laid? Statistics show that 83% of family businesses do not have a succession plan in place, and 70% of business transfers fail between generations [4].

What should you do?

By now it should be clear why intergenerational planning is so important. Although it traditionally meant the transfer of wealth from one generation to the next in the event of a premature death; this has since evolved into optimising the transfer of wealth to ensure success for many generations.

While these conversations might be difficult to initiate, preparing ahead of time and having a plan in place will help manage everyone’s expectations – and while you may not be familiar with how this should all work, getting a financial adviser on board can help provide an objective view to set your family up for success.

Tips for planning ahead:
  • Sit down with a financial planner who can be objective about money and take the emotion out of the conversation
  • Express your expectations and wishes clearly
  • Acknowledge that money can quickly become an emotional subject
  • Make sure that all the legal and financial arrangements are in place

[1] ‘Intergenerational Wealth Transfer: The Opportunity of Gen X & Y in Australia’, Griffith University, September 2017. Can be accessed here.

[2] ‘Australians unprepared for largest intergenerational wealth transfer: Perpetual’, Investor Daily, December 2019. Can be accessed here.

[3] ‘Bank of Mum and Dad faces prudential crackdown’, Financial Review, June 2019. Can be accessed here.

[4] ‘Once in a lifetime Australia’s intergenerational succession’, PWC, September 2017. Can be accessed here.

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