In Focus: Intergenerational Wealth  

How to help clients manage inheritance hopes

  • To understand what young people's mindset is towards inheritance.
  • To be able to explain why they need to become financially independent.
  • To be able to communicate ways to help younger generations start saving.
CPD
Approx.30min

Education

Advisers would agree education is important, which is why thousands of hours have been put in by members of associations such as the Personal Finance Society into pro-bono education initiatives in schools and colleges. 

Michael Stimpson, partner at wealth management firm Saltus, agrees. He comments: "These findings from Dreams highlight the role of financial education and how important it is to be realistic about future expectations.

"Relying on an inheritance is not financial planning and Millennials are playing a dangerous game if they are expecting a windfall to see them through."

But for many Millennials and generation Z - those born after 1983 - they have missed out on money education in schools, so intervening at key points in their lives as young adults is crucial. 

Stimpson adds that, even if young people have seen a will formalising an inheritance (and according to this research, only half have), there is no guarantee that the money will be there when the time comes.

Knowing how to manage their finances now is therefore vital when it comes to starting to form positive investment habits.

Starting small

It is also good to start small - even if young people do not have a lot of money now, making even small, regular savings now will stand them in good stead, according to Sandell.

He explains: "Even saving small amounts early on, e.g., through 'save the change', sets a savings habit that your future self will thank you for. 

"As the first kids with Child Trust Funds start to reach 18, they should roll it over into a Isa with good diversified investment funds and forget about it."

Pete Glancy, head of policy for Scottish Widows, provides some useful tips to help young people get their foot on the savings ladder. 

He says: "Young people (below age of 22) won’t be auto enrolled by their employer, but they can ask to be auto enrolled. 

"If they earn more than £6,240 then their employer will be required to contribute a minimum of 3 per cent of their salary towards their pension."

This is why he urges advisers to encourage younger clients - or the children of client - to check out the options available through their workplace pension. 

"Many employers will auto enrol workers at an 8 per cent contribution but offer additional matching contributions for workers who choose to save more. Pension contributions are like snowballs – the longer they roll forward, the bigger they become", he says.

According to rough calculations, £100 saved in your 20s will buy you about four times as much retirement income as £100 saved in your 50s.