Investing in Your Legacy: 5 Ways to Build Wealth for Your Family’s Future

Parents are driven to pursue two key things for their children: security and opportunity. That’s what gets them up in the morning and keeps them going — along with coffee. Just like generations before, they work hard to provide their kids with advantages they may not have had themselves. Many parents want their kids to have an excellent education, enriching experiences, and a stable financial future. This is no easy feat — especially in a challenging economy.

Building family wealth, and leaving a legacy you’ll be proud of, requires deliberate action across life’s different stages. Here are five ways to build wealth for your family’s future. 

1. Establish good financial habits

In your 20s and 30s, set yourself up for financial success. You may not have many financial obligations yet, making this the ideal window to hone your financial skills and build your confidence.

Having enough income to cover your expenses is important for financial well-being, but so is behaviour — your financial habits. Yet in a recent RBC poll, more than a third of respondents confessed to not setting financial goals (38%), not dedicating time to financial planning (37%) and failing to monitor their expenses (34%) — all of which are essentially the definition of a good money habit.

Take the time to learn how to budget. There are some standard rules like 50/30/20 to familiarize yourself with, but ultimately you need to design a realistic budget that works for you. If you want to go a digital route, RBC’s NOMI budgeting tool recommends a budget based on your spending and saving habits — and then actively helping you stick to it. Budgeting pays off, big time. Canadians who budget are less likely to fall behind on their financial commitments, according to a Canadian Financial Capability Survey. 

Specifically, budgeters are less likely to spend more than their monthly income or to need to borrow for day-to-day expenses because they are short of money. As you develop a clearer understanding of your spending habits, you can adjust as needed. Spending more than you realized on books? Consider getting a library card.

Your 20s and 30s is also a good time to open a Tax-Free Savings Account (TFSA) and a Registered Retirement Savings Plan (RRSP). If you aspire to buy property, a First Home Savings Account (FHSA) is a great way to work towards that goal. To start building wealth in these accounts, you can set up pre-authorized contributions (PACs) to save a set amount every month without even thinking about it

Even if your 20s and 30s are behind you, it’s never to late to learn better habits start  reaping the benefits of budgeting and saving. Studies find it’s worth it. Good money habits are tied to overall wellbeing, such as reduced stress, improved sleep and solid personal  relationships.

2. Set goals

Putting your goals down on paper is an excellent way to stay on track. Plus, it can be fun to dream and plan. Do you aspire to open a business, own a home, throw a big wedding, raise children, travel the world? Clarity about your goals can help you make better financial decisions.

It can be helpful to divide your goals into categories: short term goals (e.g. building an emergency fund); medium-term goals (e.g. saving up for a car or a downpayment); and long-term goals (e.g. your child’s education and your retirement).

Everyone wants to enjoy a comfortable retirement. Whatever that looks like for you, map out a plan to get there. According to a national survey, Canadians’ anxiety about retirement is heavily concentrated among those who do not yet have a plan to save for it. 

Your goals will grow with you. Keep your plan up to date and be inspired by what’s to come.

3. Ask the professionals

Building a legacy is a tall order. It takes a village. Many investors credit their financial advisor with helping them build better savings and investment habits and avoiding costly mistakes. If you’re ready to choose one, here is a guide to help the decision process. Knowledge is power, and your advisor gives you access to a valuable network of people and information. For example, an advisor can keep you up to speed on new products, timely advice, and market updates. If you have questions, they’re just a phone call away; and as your financial situation evolves, they will be there to brainstorm and execute on a plan that works best for you. It’s no surprise that 76% of investors using a financial advisor report a positive sense of well-being.

As you build your wealth, you’ll also want to build your team and seek advice from other professionals: For example, you may benefit from using a trusted accountant, a mortgage broker, a tax specialist, and an estate planner. 

4. Teach your children financial literacy

If you’re building wealth for your children — it only makes sense to teach them to manage it, too. Don’t wait until they are older. Teaching responsible money habits early on is a powerful way to help kids develop a lifelong appreciation and respect for money. 

Here are some age-appropriate ways to teach children good money habits: 

• Young children: Find everyday moments to talk to them about money in neutral, fact-based ways. Point out prices, show them the bills and coins in your wallet, and get their help counting the amount to pay. Through an allowance, or birthday/holiday money, let them experience the thrill of saving up for a special toy. 

• Teens: Involve older children in family financial discussions, such as budgeting for a vacation or a home renovation. You can also teach them how to read financial statements and pay credit card bills on time. If you help them with expenses like clothes or entertainment, review them together every month — a good way to practice financial attention. When your teen is earning and spending their own money, the Mydoh Smart Cash Card lets you oversee their money flow and gives you a chance to coach them.

• Adult children: Families benefit from direct communication. If you intend to help an adult child with a major purchase, such as a first home, nail down the details together. Are you assisting with the down payment? Is the land transfer tax their responsibility? What’s the plan for any necessary repairs? Have a fulsome discussion. This is all part of financial mentoring and boundary setting.

5. Transfer your wealth

The latter stages of life can be the most rewarding of all, when you see your efforts to build a legacy pay off. It has become more common for older parents to start gifting money while living, rather than leaving it behind after they pass, and see it make a positive impact. This can give adult children more room in their own budget, which makes a significant difference in a difficult economy.

This stage is also an opportunity to transfer your values. You may make charitable donations to causes that are important to you and your family. Discuss your thinking with the next generation so they can benefit from your lived experience.

It’s important to have a will at every life stage, and to keep it up to date. Your will can make a lasting impact. Financially, it provides direction and can help to determine tax efficiencies. For your loved ones, it can eliminate the burden of making tough decisions that could cause disagreements and a rift.  

The right time for the right plan 

Legacy building is a lifelong process, with many steps along the way. It’s driven by love because you want to see your children and grandchildren thrive. Our rapidly changing economy makes this task feel more urgent than ever. If you want to explore the right path for you, no matter your life stage, schedule an appointment with an RBC financial advisor.