My parents were depression-era babies. And like many of their generation who experienced those years of economic desperation, when things improved, they planned and saved for the future to avoid that kind of distress ever again. They taught me to do the same.
But there was another philosophy prevalent among that generation. They wanted to leave an inheritance for their kids. In fact, many deprived themselves in order to leave an inheritance so their kids would have it better than they did.
An inheritance is nice, but it can also be dangerous. Studies have found that one-third of Baby Boomers who received an inheritance spent all of it within two years. I had a client who inherited more than a million dollars and spent most of it in a matter of months. It’s true that we assign less value to something we have nothing invested in—when we don’t have any skin in the game.
Surveys from TD Ameritrade and Charles Schwab found other disturbing facts. The current generation is more likely than any other to spend retirement funds on things that have nothing to do with retirement. And more than half are expecting their parents to leave them an inheritance that will be used for their own retirement.
Well, just maybe, there’s a better financial mouse trap—setting up a matching program for those you want to help financially rather than leaving an outright inheritance. Check out this idea.