Importance of inter-generational planning
In recent years there has been much talk of Millennials, otherwise know as Generation Y, and Generations X and Z. These are demographic age groups much like the baby boomers.
Millennials are generally accepted as having been born between 1980-1994. Generation X were born between 1965-1979 and Generation Z between 1995-2015. Baby boomers on the other hand were born between 1944-1964.
So that makes me a baby boomer as I was born in 1958. Two of my children are Millennials and one is a Generation Z as he was born in 1995 though he probably doesn’t even know it!
As far as I am aware there isn’t yet a demographic group for those children born after 2015 but let’s just call them kids!
It is popular these days to pigeon-hole all youngsters especially the Millennials and Generation Z as hard done by. Not able to get on the housing ladder until much later in life. Ineligible to join gold-plated final salary pension schemes. Burdened with having to fund public sector and state pensions from the taxes on their hard-earned incomes yet unlikely to receive their own state pensions until much later in life, maybe in their seventies or later. They are portrayed as the unlucky generations.
However, the reality is very different indeed. Why is this? Well there are 3 main reasons.
They will receive far higher inheritances than baby boomers ever did.
They will receive good pensions due to auto enrolment i.e. the compulsory provision of employers’ pensions.
The cost of living will be significantly lower for them in the future.
They will experience more good fortune in other ways too. Firstly they will live much longer than us. The average life expectancy is expected to rise to 120 in the next 20 years. Today’s younger generations will experience far better health. They will work far fewer hours than us if they have to work at all because of the inexorable rise in automation and robotics.
I even anticipate house prices to fall significantly in the longer term because a big driver in house prices is salaries. With little or no salaries there will be few, if any, mortgages meaning less demand to buy houses so house prices will inevitably fall. Rents will fall too because very few people will have salaries to afford rents.
It seems to me that these younger generations have an awful lot to look forward to and they will have a far better life than baby boomers like me.
The key question for you and any baby boomers or later generations out there is this. How do you ensure that your children and grandchildren do not blow their inheritances? The amount Millennials alone are expected to inherit is £1.2 trillion! Yes you read that right. It isn’t a misprint. Let me tell you a trillion is an awful lot of noughts. It is in fact a million million. That’s 12 noughts!!!
The problem is what will Millennials spend the money on? Will they simply blow it by buying fancy cars and spending lots of money on holidays and bling? Or will they be sensible with money? For example a recent survey of Millennials spending intentions from an inheritance found that they intend to invest 10% on bitcoin or cryptocurrencies.
The key issue is do you want to have control or at least some influence over what your descendants spend from your inheritance one day? Does it bother you that your hard-earned money may be blown one day? If you are not worried maybe you should be. Typically a wealthy family will lose its entire wealth after 3 generations. It is a sobering thought.
The modern thing to do is to discuss your intended inheritance with your beneficiaries but sadly very few families do discuss such matters.
We involve beneficiaries as much as we can when arranging Wills and Lasting Powers of Attorney so we have met a number of them already. We intend to further strengthen our relationships with them by running regular seminars for the younger generation children and grandchildren of our clients. We will also be running seminars for clients where they will be welcome to bring along their future heirs as guests.
So remember to not overlook inter-generational planning. You know it makes sense.