As trillions change hands, the next generation is redefining both the legacy and the future of wealth. Many in Gen Z view potential inheritances from their baby boomer parents as a financial safety net. However, this expectation might be more illusion than reality. Recent studies highlight a notable gap between what young Americans expect and what their parents intend to bequeath, emphasizing the crucial need for financial literacy—WealthWave's core mission.
According to a recent survey by Northwestern Mutual, there’s a notable disparity between the expectations of younger and older generations when it comes to inheritance. While a considerable portion of Gen Z is counting on receiving some kind of financial legacy, their boomer parents may not be on the same page.
The data shows that 38% of Gen Z expects to receive an inheritance, while only 22% of boomers believe they’ll leave one. This gap suggests that many young adults might be overestimating their possible future windfall, potentially leaving them unprepared for financial realities.
Many young Americans view inheritance as a key part of their financial future. The survey found that more than half of Gen Z believes an inheritance is essential for achieving long-term financial stability and a comfortable retirement. However, this reliance on an uncertain future inheritance could be problematic. Only a small percentage of boomers prioritize leaving a financial legacy for their children, with many focusing instead on their own financial security in retirement.
Tom Mathews, CEO of WealthWave and co-author of HowMoneyWorks: Stop Being A Sucker, points out the dangers of this mindset. “Depending on an inheritance is not a financial plan. It’s a gamble. What we need to do is empower the next generation with the knowledge and tools to build their own wealth, independent of what they might or might not inherit. That’s the foundation of what we teach.”
The financial landscape for many boomers is multifaceted. While some have accumulated substantial savings, a significant portion faces challenges that could hinder their ability to leave behind a financial legacy. According to a recent report by the Employee Benefit Research Institute (EBRI), the median retirement savings for individuals aged 55-64 stands at approximately $144,000, far below what is typically needed for a secure retirement. Furthermore, about 40% of households in this age group have saved less than $100,000, highlighting the financial vulnerabilities many boomers face as they approach retirement.
With rising healthcare and long-term care costs, much of the wealth that could potentially be passed down may be consumed by these expenses. This financial strain further reduces the likelihood of significant inheritances for the next generation.
Bill Mitchell observes, “The fear of outliving their savings is a genuine concern for many boomers, even those who appear financially stable. This often leads them to prioritize their own financial security over leaving a large inheritance. This underscores the importance of financial literacy across all generations to ensure preparedness for these realities.”
By understanding these challenges, both boomers and their heirs can better navigate their financial futures, focusing on education and planning rather than relying on uncertain inheritances.
Despite the challenges, many boomers do wish to leave something for their children, but the conversations about these plans are often lacking. Without clear communication, Gen Z might be making financial plans based on assumptions rather than facts, which could lead to future financial difficulties.
Kim Scouller, co-author of HowMoneyWorks for Women: Take Control or Lose It, emphasizes the importance of these discussions. “Families need to have open and honest conversations about finances. Understanding each other’s expectations and circumstances can prevent misunderstandings and help both generations plan more effectively. At WealthWave, we encourage these conversations as part of a broader commitment to financial education.”
While some might joke about spending down their savings completely before passing away, most boomers are not comfortable with the idea of leaving nothing behind. However, ensuring financial security for both themselves and their children requires careful planning and, more importantly, financial literacy.
Tom sums it up well: “Financial education isn’t just about managing money; it’s about preparing for whatever the future holds. Whether or not you receive an inheritance, being financially literate is the best way to secure your future.”
WealthWave is dedicated to equipping all generations with the knowledge and resources they need to build and preserve wealth. After all, true financial security is achieved through education and taking action with what you learn, not just through inheritance. As the saying goes, "Give a person a fish and you feed him for a day; teach them to fish and you feed them for a lifetime." Let's strive to cultivate a financially literate society where everyone possesses the tools to secure their financial future. Engage in open discussions about money and inheritance with loved ones and utilize resources like WealthWave to enhance your understanding of financial dynamics. Remember, knowledge is power in building wealth and ensuring financial security.futures.
Many young Americans often see inheritance as a safety net for financial stability. However, recognizing the realities they face is crucial. By emphasizing financial education and fostering open dialogues about money, both boomers and their heirs can adeptly tackle the challenges of securing their financial futures. It's time to dispel the illusion of relying solely on inheritance and seize control of our financial destinies by becoming financially literate. The time to begin is now.
