Forget E. F. Hutton; when Warren Buffett talks, people listen. And I don’t feel like that’s simply because he’s the world’s most famous investor, though he is. He’s a person of wisdom. A wisdom that seems to have been applied not only in his investing, but also in his marriage, his parenting, and his own personal finances.
So when he recently offered his personal advice on estate planning—on how, when, and why you should talk to your kids about your estate plans—it certainly got my attention. And it offers a framework for all of us, regardless of our net worth.
“When your young people are mature,” Buffett said, “have them read your will before you sign it. ” So, when is it transparent, when our young people are mature and before signing our will. But how?
“Be sure each child understands both the logic for your decisions and the responsibilities that they will encounter upon your death.” Buffett’s instructions on how also require another step here, because to explain the logic and the roles children play in our wills, we have to understand them. You need to know your plan well enough to explain it.
This wisdom can (and I believe should) be implemented in all aspects of our private finances. I am aware that some financial systems and vehicles can have many complex complexities that require professional advice. Still, a smart rule of thumb when it comes to private finance is that you shouldn’t adopt a strategy that you can’t do with a fifth-grader. (Thank you, Larry Swedroe. ) And yes, that means if you currently have methods that you don’t understand, I submit to contact your financial advisor to get that knowledge.
But you’re not likely to put this good advice to use without understanding why, and Buffett doesn’t leave us hanging here. He says, “You don’t want your children asking ‘Why?’ in respect to testamentary decisions when you are no longer able to respond.”
In fact, it’s difficult for a circle of relatives to navigate the loss of an enjoyable one, and our inheritance plans are literally our last words to those we love most. Too many inheritance plans, either due to lack of effective manufacturing plans or effective lack of communication, resulting in a mysterious or confusing last word, at best. And we can eliminate this confusion by discussing our plans before our end.
Assembly manufacturing plans are not the first or only time we will have the opportunity to talk about cash with our young people, so how can we apply this, when, how, how the framework to talk about cash with our young people?
First of all, hint at why we’re talking about cash with our youth first. In particular, Buffett comes from a generation for whom discussions about cash, with just about anyone, were taboo. But isn’t it our primary duty as parents to raise our young people to be independent and contribute to the members of society?Otherwise, how will they be informed to grow, protect, give, and live, if not from us?(And no, despite a great effort to integrate monetary literacy and welfare into our school systems, we have largely failed to replace our archaic technique to the university world. )
And here is the explanation of why I have heard of being fixed and able to articulate their monetary and life classes for their children:
We must get there first.
Whether the topic is sex, drugs, rock’n’roll, or money, we want to get there first as parents. We want to provide our children’s foundational understanding of these most important issues before they come home from school or a friend’s house having had their foundation poured by some kid with an opinionated older sibling.
So we want to know our opinion before we can percentage it, but how do we know when to percentage it?
Buffett has given us two orders here, one that’s transparent and one that’s a little more nuanced. First, it tells us to make a percentage (in this case, our estate plans) when our young people are mature. This, of course, will be a sliding scale for each and every child, parent, and subject.
I can imagine that having your kids read your will falls later, if not last, on this inculcation timeline, if only because reading legalese is over the heads of most seasoned adults. Yet, learning how to spend, share, and save via three jars in the kitchen can come much earlier, followed by understanding credit and money in the digital domain, borrowing, taxes, insurance, and one of the most fertile fields for financial understanding—education planning for your children.
But how do we know when our young people are mature enough to master these topics? When they show genuine curiosity.
Yes, this means that this is not a program foreseen in the calendar of speeches on the couch. It requires fluid technique and ears to listen when our children express genuine curiosity. Still, it might be necessary to know the basics. query that you want to be answered and decide on an age-appropriate answer.
Let us now move to the most nuanced point that Buffett argues through his advice. He said: “When your children are adults” -compruce it- “Ask them to read your will before signing it. ” Before signing it, Warren, but why?
I guess this is another opportunity for our young people to grow. Asking them to review our wills before pointing them out; Discussing our movement before putting the sign in front of the house; By letting them know that our role had been reduced just before their freshman year of college, putting tuition fees at personal schools out of reach; Discussing the opportunity to buy a moment at home; By enlisting them as co-owners (as low as the percentage of ownership) in those decisions that seem vital to them, we use those conversations as an additional opportunity to move our young people into adulthood. And we normalize those vital decisions when they’re still under our responsibility, which prepares them to make those decisions as adults.
But how?
Let’s use the classic example that persisted for generations. Your teen asks, “How much do you make?”
They expressed their curiosity, but does that mean it’s time to return the paystub?Probably not. Let’s follow Simon Sinek’s recommendation and “let’s start with the why”.
“I appreciate your question, and I’m wondering what sparked it. Why are you curious how much I make?”
You may want to ask some questions to get to reason, and that, combined with your intimate understanding of your child’s maturity, will undoubtedly tell you your final answer. And it is even likely, that your answer does not even imply any Number. Remember Buffett’s recommendation here: “Make sure the child understands the logic of his decisions and the daily works he will face . . . “
In my experience, the younger our kids are, the more logic itself will suffice—but as our children age and mature, it’s altogether possible that actual numbers will be beneficial, if not necessary. After all, especially as it relates to the subject that was our launching point, estate planning, our kids will eventually find out what the numbers are. Therefore, in lieu of making it a total surprise, shrouded in mystery, why not discuss it now—invite them into the discussion, teach them the logic behind your decisions, enlist them in the implementation of your plans, and help them learn how to make life’s most important decisions with competence and confidence.
So, I’m curious: Do you feel more prepared to have your next meaningful verbal exchange with your children, no matter what age they are?
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