Inheriting a large sum of money or property can seem like a dream come true, but for children, it can also bring about numerous problems. While it may seem like a financial windfall, an inheritance can often have detrimental effects on a child’s well-being, relationships, and future success.
One of the main problems with giving children large inheritances is that it can lead to a sense of entitlement. Children who receive a large sum of money without having to work for it may start to feel like they don’t need to put in the effort to succeed in life. This can cause them to become complacent and unmotivated, which can negatively impact their personal and professional growth.
Another issue with leaving kids with large sums of money is that it can damage their relationships with friends and family. When children receive a large sum of money, they may start to feel superior to those around them, which can lead to resentment and conflict. This can be especially problematic in family relationships, where inherited wealth can cause rifts and division that can last for generations. If the money is taken away, it can very negative impacts. An extreme case which garnered national attention involved the adult son murdering his father after his allowance was rescinded.
In addition to these social problems, financial windfalls can also have a negative impact on their financial well-being. Children who receive large sums without understanding how to manage it can quickly spend it all, leaving themselves in financial ruin. Children who inherit wealth may not have the experience or knowledge necessary to invest it properly, which can lead to poor financial decisions that can have long-term consequences. Historically, lottery winners and rich young professional athletics exhibit the same bad habits when sudden money comes into the picture.
Another problem with giving children large inheritances is that it can discourage them from developing their own sense of purpose and identity. They may not feel the need to work towards their own goals and dreams, since they have a substantive financial safety net. This can lead to a sense of boredom and unfulfillment, harming their overall happiness and well-being.
Finally, giving children large inheritances can also cause problems when it comes to taxes. Large inheritances can result in significant estate taxes, which can eat into the inheritance and leave the recipient with less money than they expected. Additionally, if the recipient is not careful with how they use the inheritance, they may end up incurring other tax liabilities, such as income taxes or capital gains taxes.
Giving children large inheritances may seem like a good idea at first, but it can actually bring about numerous problems. To ensure that children are well-equipped to handle wealth and financial success, it is important to educate them early on and often on the responsibilities that come with money, enlist your financial advisor to help with that education and encourage them to work towards their own goals and aspirations.
MyPerfectFinancialAdvisor is the premier matchmaker between investors and advisors using personalized data, proprietary algorithms, and deep industry experience.