Few people want to talk about death or money.
I bumped into my friend, Rose, several months ago, as I wheeled a giant, black stroller into a coffee shop. (At 27 and fresh out of graduate school, a combination of babysitting and freelance work paid the rent.)
Rose had her laptop on the table and looked stressed. “I don’t know what to do,” she said. “I need to talk to my grandparents about money. What is my mom going to do when they die? What is the plan?”
Rose is just one of millions of Americans standing on the shore of an enormous financial tidal wave. Over the next 30 years, a wealth transfer of nearly $58 trillion is expected to change hands from baby boomers to younger generations in the form of inheritance, according to a recent study from the Boston College Center on Wealth and Philanthropy.
“The greatest wealth transfer in history is through the boomer generation,” said lead study author Paul Schervish, professor emeritus of sociology and former director of the center.
More to save, or lose
The enormous wealth transfer will give the next generation more money to spend, leading to increases in higher education tuition, insurance premiums and housing prices. But will this generation save or invest this money? Ironically, it’s unclear whether those inheriting money will be able to afford the rise in living costs engendered by their inheritance.
Younger generations may be more susceptible to the behavioral biases that make it difficult to save. While humans in general tend to prioritize instant gratification, younger generations who grew up with technology that enables them to get whatever they want with a swipe or tap may feel the pull of these impulses more intensely than older generations.
And those who do invest are likely to be less focused on maximizing yields than their parents. Research from the Forum for Sustainable and Responsible Investment shows that those born from about 1980 to 2000 will not just base their investment decisions on the amount of their returns, but also on altruism.
The tendency toward instant gratification combined with altruistic investing means that less money will flow into the economy as a whole.
In the coffee shop, the economic impact of wealth transfer seemed far off and intangible. Rose’s anxiety about her mother felt immediate and real. Her father died when she was 11, and a significant portion of his inheritance went to paying down roughly $300,000 worth of debt.
Since then, Rose’s grandparents have played a supportive role in her family’s financial well-being. But she wonders who will help her mother when her grandparents die, and if she is expected to provide support. Will some wealth be passed down? How long will it last? These questions are still left unanswered.
Having the tough conversation
I asked Rose if she could try talking to her mom or grandparents about what comes next. “Yeah,” Rose said. “There’s just no rule book about how you’re supposed to deal with these things.”
Money—whether it’s an inheritance, paycheck or paying the bills—is often on our minds, but is rarely the topic of conversation.
“People don’t know how to talk about money because they have never really heard it done,” said Susan Bross, a financial counselor with the Financial Therapist Association. Talking about money is viewed as socially incorrect. Unlike with sex and other topics, conversations about finance are rarely depicted in movies, television and popular culture. A common language around money has not developed.
“The only time I hear people talking about money is when they have a big win, a bonus, a raise,” Bross said.
The idea that you need to inherit or earn an enormous amount of wealth to warrant financial advising is a common misconception. Modest amounts of money are worthy of meaningful discussion. If beneficiaries invest wisely, even inheritances under $25,000 can grow significantly and make differences in their lives.
Amy Brooks* inherited $15,000 while in college when her grandfather died. Brooks said no discussion took place either before or after the money became hers.
Brooks graduated college and landed a well-paying job in New York. She used the money from her inheritance on dinners, flights and drinks for friends, she said.
Two and half years later, almost all of the money was spent.
“I just lived outside my means,” Brooks said. “If I had taken that and invested $10,000 and used $5,000 as a cushion, it could have been something more than nothing.”
With a bit of discussion to overcome the all-too-common “I want it now” mentality, Brooks’ small fortune could have been multiplying. Instead she is now working to rebuild the money she squandered. And as Rose’s trepidation proves, holding the uncomfortable but necessary conversation early on can prevent more heartache later.
These stories are telltale. We can’t afford to remain silent about the largest wealth transfer in history; our wallets, well-being and the economy depend on it.