2997: [Part 1] How and Why to Pass on Financial Values to Your Heirs by Kathleen Coxwell of Boldin on Financial Legacy Planning

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[00:00:33] Relationships and more. So to optimize your life in other areas, just search for Optimal Living Daily in your podcast app. Now on to the show. This is Optimal Relationships Daily. How and Why to Pass on Financial Values to Your Heirs. Part 1 by Kathleen Coxwell. You worked and saved for years. You can now sit back, satisfied with a job well done, and enjoy some leisure.

[00:01:01] However, are you planning on leaving something to the ones you love? You might be surprised that the best inheritance is not necessarily monetary. Leaving meaningful values, especially financial values, can help ensure a legacy of success. The Best Inheritance? Knowledge and Values The best gift to leave your heirs isn't a big pot of money. In fact, famously rich people like Warren Buffett and Bill Gates have said they aren't going to leave their kids massive fortunes.

[00:01:29] As Buffett told Fortune magazine back in 1986, the perfect amount to leave your child is, quote, enough money so that they would feel they could do anything, but not so much that they could do nothing, end quote. And, recently, Yvonne Chouinard, the founder of Patagonia, transferred ownership of the company, valued at about $3 billion,

[00:01:51] to a specially designed trust and non-profit organization designed so that the company's $100 million annual profits are used to combat climate change and protect undeveloped land around the globe. The best inheritance is the set of financial values that teach respect for money. Or, as the old saying goes, give a man a fish and he eats for a day. Teach a man to fish and he'll eat for a lifetime. Here are eight golden rules to teach your children about money, no matter how old they are.

[00:02:21] Number one, money isn't valuable, but it helps you find value. Money in itself isn't valuable. You can't eat it. You can't build a house out of it. But, money does help you understand value. As Denise Cummins, a fellow of the Association for Psychological Science, and the author of Good Thinking, Seven Powerful Ideas That Influence the Way We Think, notes, giving children an allowance based on the work they perform makes them think about the utility of what they want to buy,

[00:02:51] versus how much their effort to earn the money is worth. She tells a story about her two daughters in the toy aisle of Target, deciding whether they want to spend all their money on a toy they may play with once, or saving money to buy something better later on. For her, an allowance based on work is the quintessential way to teach children financial literacy, as well as character traits like patience, thrift, and generosity. Number two, investing is a lifelong project.

[00:03:19] There's a difference between keeping money under your mattress and using your money to make yourself and the world richer. During the pandemic, Americans have been hoarding cash. According to The Economist, the value of dollars in circulation was growing about twice as fast as the historical average. Though a rush to the safest of safe assets is understandable in a crisis, eventually, more level-headed thinking will lead us back to putting our money where it will do more than lose value to inflation.

[00:03:47] When kids are in late childhood or their tween years, it's a good time to create a custodial brokerage account for them. You can teach them how to do research on their favorite brands and show them the ropes of value investing. Because of the tax implications of owning and trading stocks, you may want to include your kids on a discussion with a financial advisor, and you will want to set up periodic meetings with them, monthly or quarterly, to review their portfolio's performance.

[00:04:14] Ultimately, building wealth is more than competing for a high-paying job. And who knows? You might raise the next Warren Buffett. Number three, work gives meaning. Many of us remember our first summer job. Mine was at an ice cream shop. I didn't want to do it, especially because some of my friends had parents who would subsidize their carefree summers. But, the money I made was mine to spend or save. Work teaches kids self-reliance.

[00:04:41] And having your money to spend is essential to lesson one. But, having a job is more than just accumulating money. It's also a source of pride and identity. I knew I didn't want to work in an ice cream shop forever, which motivated me to perform in college and seek advanced degrees after college. Adults are more likely to build wealth if they have a financial plan. And they're more likely to have a financial plan if they see the plan as part of their larger career. Teach them how to find meaning in work

[00:05:09] through the Japanese concept of ikigai. Number four, financial values. Credit is building trust. Credit comes from the same Latin word that means believe. When people give you credit, it's because they believe you will pay it back according to the terms of your loan. Adding your tween or teen as an authorized user to your credit card is a good way for them to start building a credit history. But, it's important to teach them the necessity of paying back the money they borrow

[00:05:37] and being aware of high interest debt and revolving credit. The flip side of credit is debt. It's important to teach children the difference between good debt and bad debt. As Robert Kiyosaki, author of the best-selling book Rich Dad, Poor Dad says, Rich dads borrow money that will make money, like taking out a mortgage on a rental property, where poor dads borrow money to spend. Building good credit is about building good habits, maintaining good debt, and using that to increase your wealth.

[00:06:07] Number five, setting up a budget means knowing your limits. Once children have graduated from college and have their first jobs, they will need to create a real budget, probably for the first time in their lives. You might have made them pay for incidental expenses like gas and entertainment with their childhood and teenage allowances, but when they're not living under your roof, they will also need to budget for basics like food and rent. If they had to borrow money to pay for college, they will also have to factor in paying off those debts as well.

[00:06:37] Spending is only one side of a budget. The other half is income. You can set them on the right path by going over their new jobs benefits, like health and life insurance. Show them how to increase their income by focusing on paying off high interest debt first, and make sure they don't prioritize paying off low-interest student loans over taking an employer's 401k match. There are a lot of great budgeting apps that can help adult children manage their money, and you can help them get started by using a retirement plan or two. To be continued,

[00:07:11] you just listened to part one of the post titled How and Why to Pass on Financial Values to Your Heirs by Kathleen Coxwell. And thanks a lot to Kathleen for a great start to this article. Now, I really love how everything she's sharing today focuses not on dollars and cents, but on money mindset. Of course, this is the basis of passing on values, as the title indicates. The idea of respecting money goes a really long way,

[00:07:40] not just for building wealth, but also for not fighting against it. We have such a complicated relationship with money, and can oftentimes really hate it for one reason or another. But just like so many of the strained relationships we have, either with people, places, ideas, or anything in between, it can start in childhood. To get our kids on the same side, if you will, as money, and integrate it into their lives in a really healthy way could make a big difference,

[00:08:10] not only on their financial security, but their general life satisfaction too. So, consider how money is talked about addressed, managed in your family, and how it's maybe affecting your children, either directly or indirectly. We are done with today's part one, though, everybody. I thank you so much for being here and listening all the way through. Have a great rest of your Thursday, and do be sure to come on back tomorrow for the remainder of this great article. That's where your optimal life awaits. of this great activity, and I think you have a good chance. And let's go in a second. Thank you. Thank you very much for this. Thank you. Thank you.