Affluent Canadians plan on leaving, on average, almost one-third (30%) of their wealth to their children, according to a study on high-net worth Canadians (those with investible assets of US$1 million or more) and the inter-generational transfer of wealth by BMO Harris Private Banking.
The study is the fifth in a series by BMO Harris Private Banking examining trends among the affluent in Canada.
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The study found that they plan to divide the rest of their estates as follows:
- Spouse or partner (60%)
- Other family members (four per cent)
- Charities (three per cent)
- A board or company (three per cent)
Additionally, almost 80% of high-net worth Canadians feel that their children are ready to manage their inherited wealth. This sentiment could perhaps be attributed to educational efforts; two-thirds (65%) reported that they spend time educating their kids about money matters.
Yannick Archambault, vice president and COO, BMO Harris Private Banking, said: "Affluent Canadians value leaving a legacy and will be passing on a significant portion of their wealth to their offspring. However, with wealth comes complexity. It’s reassuring to see that so many are taking the time to help their children become more savvy about finances."
Mr. Archambault noted that in 2008, BMO Harris Private Banking launched Financial Fluency, a program which caters to the children of their clients who are looking to gain basic financial knowledge and learn about investment principles in order to develop their personal finances and family wealth.
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Wealth and Generation Next – Better or Worse Off?
According to the study, just a quarter (26%) of high-net worth Canadians feel that their children will be better off financially than them. Forty-one per cent think that their children will be worse off than them, with 60% believing that this will be because of the state of the economy.
Interestingly, affluent Americans are more optimistic about what the future holds for their children compared to their northern neighbours; 43% in the US say they believe their children will be better off financially and 35% believe they will be worse off.
Archambault added: "Many are still feeling the effects of the 2008 recession, so it’s not too surprising that people may not be feeling upbeat about what the future has in store for their children. While we don’t have the ability to guarantee bull markets and a strong overall economy for our children, there are things we can do to ensure they’re well positioned to weather any financial storms. Teaching our kids about personal finance issues is a good start but it’s also important to be transparent about family finances. The earlier a family is committed to educating the next generation, the better off they will be when the transfer of wealth occurs."
