Generational Wealth: What Are Americans Planning to Do With Their Money?
Written by
Dawn Allcot
Edited by
Amber Barkley
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While many Americans worry about saving for retirement or building an emergency fund, there’s another financial concern on people’s minds, too. More than one-third of Americans (34%) are unsure if they will be able to leave an inheritance to their loved ones after they pass on, according to a new survey from Empower. According to the study, 67% said they would like to do so.
The study looked at family finances from six different types of households:
- Single-income;
- Single-parent;
- Dually-employed with kids (DEWK);
- Dual-income, no kids (DINK);
- Empty-nester;
- Extended families living under one roof.
In spite of the differences in living arrangements, some startling similarities emerged. For instance, only 18% of families consider support for aging parents when they’re thinking about future finances, although 21% of Gen Z is planning ahead to be able to provide support.
Financial Concerns Across the Generations
Leaving a financial inheritance stood out as a top concern for both dually-employed with kids (DEWK) households and empty nesters. Leaving an inheritance came in first on the list of financial goals for empty nesters, ahead of philanthropy and retiring comfortably.
DEWKs were most concerned with funding their children’s education, leaving a financial inheritance and retiring at a goal age. DINK households (dual-income-no-kids) placed the most importance on an early retirement, traveling and new experiences and building an investment portfolio, according to the survey.
Extended families living under one roof made early retirement, building an investment portfolio and not living paycheck to paycheck as their biggest financial goals. Single-income families prioritized buying a home, saving and paying off debt. Similarly, single-parent households placed the most importance on funding their children’s education, buying a home and paying off debt.
Should You Save Money for College or an Inheritance?
Leaving a financial legacy in the form of an inheritance to your loved ones may seem like an admirable financial goal. GOBankingRates discussed the topic with Carlos Rodriguez, director of financial planning at Edelman Financial Engines, who offered some advice to set minds at ease.
“First and foremost, prioritize your own financial situation,” he said. “Ensure you have a robust financial plan for your retirement, emergency savings and healthcare needs before worrying about leaving an inheritance.”
Similarly, as much as you may want to help pay for your children’s education, if you don’t have your own financial ducks in a row, you should encourage your children to explore other options to pay for college and other expenses that come with adulthood.
“We have seen many cases where someone does not have enough saved for retirement because they prioritized funding for college, helping their children with a down payment for a home or buying a car,” Rodriquez pointed out. “These aren’t bad things; in fact, these are goals that should be discussed and planned for, but these are also things that can be addressed through financing or other means. You cannot borrow for retirement but can take out a loan for almost anything else. Prioritize saving for retirement.”
Don’t let guilt or societal expectations force you to sacrifice your own future financial security. “It’s the old oxygen mask analogy: put yours on first before helping others,” Rodriquez said. “If you’re concerned about not leaving a significant inheritance, communicate openly with your children about your financial situation and set realistic expectations. The number one thing you can do to set your children up for success regarding their financial situation is to teach them how to be financially independent.”
Addressing Inheritance Disputes, Funeral Expenses and Other Concerns
Of course, by the same token, you don’t want to present additional financial hardships for your children after your death. The death of a parent can lead to disputes about the estate and any money left in accounts. It can also result in unexpected funeral or burial costs. In either situation, you can minimize conflict with open communication beforehand.
“Clearly communicate your wishes and intentions regarding an inheritance,” Rodriguez advised. “This includes details about distribution, any conditions or restrictions, and the purpose behind your decisions.”
Additionally, he said, “Create an environment where your children feel comfortable asking questions about inheritance. This can help prevent misunderstandings and potential conflicts in the future.”
If you’re worried about burial and funeral costs, Rodriguez pointed out that a life insurance policy is a strategic way to provide a financial safety net without cutting into other investment priorities.
“The amount of life insurance required varies based on individual circumstances,” he said. “Consider factors such as outstanding debts, funeral costs and ongoing financial needs of dependents. If you’re still unsure, you should seek guidance from insurance professionals or financial advisors to determine the appropriate coverage based on your specific situation. They can help tailor the policy to meet your needs and financial goals.”
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