Over the next decade in Canada, approximately $1 trillion is expected to be transferred from one generation to another through inheritance. However, far too few parents and grandparents appear to have confidence that their heirs will look after this money with the necessary capability.
One of the most effective and time-tested ways to approach this problem is to introduce younger family members to charitable and philanthropic giving. Charitable and philanthropic giving has a positive effect on children. It’s been shown to make them happier, more connected with the world and more successful.
The Importance of an Early Start
The younger the child is when the discussion begins about giving, the more it becomes a matter of practice and habit that continues into adulthood—a finding that’s been validated by considerable scientific research.
Developmental psychologist Marilyn Price Mitchell, writing in Psychology Today Acts of Kindness: Keys to Happiness for Children & Teens – observed that youngsters who perform acts of kindness experience increased wellbeing, popularity and acceptance among peers.
Result? Better classroom behaviour and higher academic achievement. Some UK research – Growing Up Giving: Insights Into How Young People Feel About Charity – concluded that young people have “great charitable expectations,” especially between the ages of 9 and 11:
- Philanthropy teaches children about worlds beyond their own experience
- It fosters tolerance and empathy
- Through the fundraising process it teaches entrepreneurial skills
Financial Literacy
Charitable and philanthropic giving teaches children the fundamentals of financial literacy—an important lesson for all young people as learning sound money management skills early in life can help set them up for future success. Charitable and philanthropic giving occupies a central place in discussions about spending and saving decisions, setting long- and short-term goals, and covers many other aspects of financial literacy in the young.
There’s an insightful book written by a The New York Times personal financial columnist, Ron Lieber, that addresses these matters. It’s called The Opposite of Spoiled (originally published in 2015) and is subtitled Raising Kids Who Are Grounded, Generous, and Smart About Money. A fantastic goal!
This particular book is based on a key issue: that children are hyper-aware of money, and they have scores of questions about its nuances. We encourage any parent and/or grandparent trying to raise financially literate children to read it carefully and begin to put the advice it imparts into practice.
By taking these lessons into consideration, parents and grandparents can:
- Shape the basic financial behaviors that are increasingly important for young adults
- Imprint lessons about what a family truly values
- Prepare the younger generation to responsibly inherit the money bequeathed to them
Of course, there’s also the benefit to the charity, making these lessons an even larger and more significant win. If you’d like personalized advice, please reach out to our team. We’d be glad to offer guidance that reflects your family’s needs and goals.