What is a legacy? It largely depends on who you ask, though in a financial sense, most people consider their legacy to be the money they leave to loved ones. However, if you want to leave a legacy, it can be so much more than that.
In Oxford Languages, the first definition of legacy is solely about money, however, the second definition gets more specific. It says: “the long-lasting impact of particular events, actions, etc. that took place in the past, or of a person’s life.” Whether you realize it or not, you have the potential to leave an impact that is generations long, and goes beyond your wealth. What will you leave?
Why You Want a Lasting Legacy
If you have first-generation wealth, you know how hard you worked for what you have. However, your children are growing up with second-generation wealth. It’s all they know. And unfortunately, many families don’t have third-generation wealth because that second generation doesn’t really understand what it takes to be wealthy and maintain that wealth. All they know is that their needs and wants have been provided for.
If you intend to leave a financial legacy to your children, you want them to be well-prepared for it, because they won’t have the experience and knowledge you have unless you give it to them. It’s crucial to leave a legacy of knowledge to your heirs, too.
When you do this, you create the potential for a ripple effect that allows your family to maintain wealth for generations. Doing so can ensure that the people you love, and subsequently the people they love, will be financially comfortable.
How to Leave a Legacy
As it should be clear by now, your legacy planning should extend beyond just the financial preparations you make. In addition to your financial legacy, you want to leave a legacy of values and education. Otherwise, it’s all too easy for your heirs to mishandle the funds that you leave them. It might last for a while, yet if it runs out, how well-equipped will your children or grandchildren be to create new wealth?
Your Financial Legacy
One of the most powerful ways to leave a financial legacy is to have whole life insurance. After all, that’s a guaranteed wealth transfer upon your death, and it goes to your heirs income tax-free. This makes the wealth transfer as efficient as possible, preventing losses via taxation and fees.
Whole life insurance isn’t a single purchase asset, either. As your income increases, you can purchase more and more insurance, which gives you more capital AND a greater legacy to your heirs.
In addition, you can use whole life insurance to create a family banking system that gives the people you love a system for financing throught their whole lives. You can learn more about how to create a family banking system in the book Perpetual Wealth.
Your Legacy Values
In addition to your financial legacy, you also want to pass on your values to your family. While your children may end up having their own values, there are certain values you can impress upon them as a part of your family identity and culture. For example, your family values could include being “problem solvers, not problem makers,” which is the family motto of one of our Prosperity Thinkers team members.
We encourage you to include your family in creating these values. As your children grow, ask for their input, and create a document together that outlines your family identity. This gives your children a feeling of ownership over the family culture.
Many families use this family identity as a way to guide access to the family banking system. For example, if the family values entrepreneurship, access to the family bank may require a business purpose. For example, a child turning 16 may submit a request to fund a car with the family life insurance policy, along with a repayment plan from their new job.
If you ensure that your family has strong values and lives by them, you can be confident that they’ll continue to live by these values long after you’re gone.
Your Educational Legacy
The education portion of your legacy goes hand in hand with your values. That is to say, it’s up to you to teach your loved ones how to be good stewards of their money. For example, if you want your family’s wealth to last for generations, you want to ensure that your kids are component savers, that they know how to pay back loans, that they have a strong work ethic, and other important skills.
Fortunately, we recently learned about an incredible way for kids between 8-18 to learn age-appropriate lessons about money. It’s an app called GravyStack (which we are affiliates for), and gives your kids a system to earn money from you, while they learn about how to be good stewards of their money. It helps kids save, invest, and spend, as well as be charitable. To complement the app, the developers also have a book for parents called Value Creation Kid, which helps parents develop ideas to teach kids about money.
How Teaching Values Compliment Your Legacy
By teaching your children values and principles about money, you create a legacy that doesn’t just last for one generation. Instead, it has the potential to last for many, many generations. While it requires a little bit of trust, it ensures that your children know how to manage the money you leave them, and you’ve created a good example for them to teach their children the same.
While there will be generations of your family you never meet, they’ll be the children and grandchildren of your loved ones. Setting up this kind of legacy allows you to rest assured that your family always has the tools to do right by the next generation. Then, you have faith and trust.
You’ll also know that the kids your raise will grow into good people with good values, and that process will just multiply and multiply. It’s your opportunity to leave a lasting legacy on the world that transcends you.
Leading by Example for a Lasting Legacy
Ultimately, your power to leave a legacy depends upon the example of your life. You can’t just give your values lip service, you want to walk the walk, too. If it’s important for you to save money above all else, don’t live life always spending money. If one of your family values is to treat people with kindness, don’t set an example for your family where you’re being rude. And if you create consequences for not living by these values, it’s in your interest to accept those consequences, too.,
Your kids will see how you live and pick up on those non-verbal cues. You can tell them all day what’s important to you, yet if you don’t live your life that way, it doesn’t matter how many times you say the contrary. Lead your family by example, and you’ll create trust and integrity, which are the glue to this generations-long legacy. Without trust and integrity, that legacy will erode over time.
If you’re ready to begin the financial portion of your family legacy, connect with us today, or email any questions you have to email@example.com.