I’m Banking On An Inheritance
Well, not really. Sorry for the click-baity title but it does directly refer to the article I’ll discuss in this post. It’s not me that’s banking on an inheritance, I don’t need one, it’s Generation Z kids.
That term – Generation Z – isn’t even used a whole lot, at least I don’t see it around too much. Most articles that group people and discuss generational differences stop at Millennials, mainly because they still haven’t gotten over how fun it is to write yet another article about their love for expensive avocado toast.
But this article from Bloomberg references Generation Z in particular, the one after Millennials. And it specifically discusses the fact that those kids are really expecting to have a whole bunch of money dumped in their collective laps later in life. Maybe not all of them, but a much larger percentage than in previous generations. It’s a result of a survey from Merrill Edge of 1,000 “mass affluent” young people.
Here’s the graphic from the article to show that
So, more Generation Z kids are expecting money later in life than in previous generations, by a good margin. Not only do they expect it, according to the article they say that their future financial stability in retirement will depend on it. The article states:
“Sixty-three percent of affluent children between the ages of 18 and 22 say financial stability in retirement will depend on inheriting money”
What does this say about their generation? Is this a good thing?
Or, does this say more about the generation who raised them?
The article tries to dive into the underlying causes for this sentiment. One explanation according to the author:
“The rise in student debt, increased life expectancy and the many competing priorities for money that are considered the “new normal” for younger generations have them wondering how they will pay for it all.”
Hmmm… I’m calling B.S. on that one. The oldest of the Generation Z kids is around 23 – most sources agree that the generation starts in 1995. I really don’t think the average 23 year old is sitting around contemplating future demographic trends and life expectancies, or “competing priorities for money”.
Student loan debt, sure, many of those older Generation Z kids are seeing that now. But they likely haven’t even made a payment yet.
I think most 23 year olds are having fun, doing reverse keg stands, and going to Denny’s at 4:00 in the morning while still drunk. Only now it’s all Instagrammed and YouTubed. Or is this just me projecting my admittedly misspent youth onto today’s kids? I’m open to being totally off base here.
The Mass Affluent
The author goes on to say that this sentiment is a result of what she calls the mass affluent, or those with a leg up on society. To me it’s a more plausible explanation.
When you grow up a bit spoiled and surrounded by a certain level of comfort and material wealth, there’s probably a subconscious expectation that it will continue in your life. Even if that means someone has to dump some money on you by way of inheritance to make it happen.
What I find most intriguing about the article and the study it references is where these Generation Z kids think their inheritances will come from. From the article:
“Some 17 percent think it could come from friends, compared with 4 percent of people of all ages. Meanwhile, 17 percent are betting their grandparents have something in store for them, compared with 6 percent of everyone polled. And 14 percent of Generation Z members say extended family will shell out some cash, versus 5 percent overall.”
Friends? Who gets an inheritance from friends? I mean, I’m sure it happens but is this common? I would take a bullet for a few of my best friends and I know they would do the same for me. But I wouldn’t dream of leaving them an inheritance. Unless they fell on super hard times, then I would help and that would just be called “giving them some money to help”.
The gentleman who commissioned the study tries to explain this thusly:
“They’ve grown up in a sharing economy—think Airbnb, Uber and crowdfunding—so “why wouldn’t you have some sort of shared way with friends to finance your future?” he said. “
So the gig-economy and sharing apps, taken to their natural conclusion, leads to an expectation that your friends will give you an inheritance one day? Is this some sort of financial hippy-commune?
Not sure I’m buying it, but I have no explanation myself.
What say you financial warriors, are you banking on an inheritance? Do you feel you have to rely on one? Do you know any Generation Z kids who actually do feel this way?
I had a talk with my son one day. He is 9. He thought that we were going to buy him a car when he turns 16, and would give him the house when we died. I made it clear that we wouldn’t. Chalked it up to his age, and ignorance. But we could have easily gone a few years without having that talk!
Where we live (avg family income over $120,000 according to Wikipedia), parents routinely buy their kids cars when they are old enough. Dont know if that is true everywhere. They probably unconsciously expect an inheritance too, who knows?
I agree. It must be age and ignorance. Kids are dumb. What do they know? Pretty much nothing. Most people won’t have any inheritance to give. Our kid can take public transportation when he’s 16. 🙂
In India, you are supposed to take care of your parents once they are retired. And in return, you inherit everything they inherited from their parents. It doesn’t always work. My parents hardly got anything – too many siblings, and the money came late in life. The point is, I was taught to expect to inherit, but was intelligent enough to realize that they could spend it all. My son wasn’t. He still expected it.
Very interesting about India Busy Mom, I love hearing different cultural aspects of this and both you and Joe bring great diversity to the conversation!
Darn it. You gave away my 4am hang out! Now it’s going to be overrun by Z’ers.
My kids are generation Z. Their inheritance consists of college education for them and hopefully their kids.
That’s it,
Ha, back in my heavy drinking and crappy eating days, Denny’s in the middle of the night was a pretty common thing. The damage I did…
Not counting on leaving anything after school is paid for. We might inherit some funds from parents life insurance but I have no idea how much and I plan on being fi on my own long before that happens.
My goal is to provide the education and drive for my kids to do it on their own. I believe that being born with a silver spoon leads to many people having depression. Being born with a purpose leads to success. I want to leave my kids with purpose and the skills to achieve it.
I agree with your statement about being born with purpose leading to success. The key is you have to make sure your kids cultivate that purpose.
I’d love an inheritance, but am certainly not banking on it. Would make life easier, though, from the financial side.
P.s. I think I fit squarely into a class called Xennials (in between Generation X and the Millennials). Interesting place to be as I understand a bit of both.
I don’t understand so much about the Generation Z crowd.
TPP
Yeah Gen Z is new to me as well, although at my job we’re starting to hire some fresh-outta-college kids. So I’ll be getting to know some soon!
We told our three boys they had to earn money for their first car and we would match it up to a predetermined level. It showed them the power of earning and exchanging time for dollars. It also thought them a bit about banking. Our youngest at the age of 10 wanted to start saving too. It was pure joy standing back watching him make his own bank deposits. He is now 20 and still drives the same car he purchased at 14. They too saw all their friends gifted cars at 16, but knew it was different in our family and have since thanked us for our methods.
That’s awesome, what a great way to do it! The first car I bought was also with help from my parents, but I definitely worked for the money and spent my savings.
I’ll be the first to admit that in 2014 I inherited $1 million from my late Father’s estate. This gave me a huge leg up in planning for early retirement. Anyone reading this, please don’t judge me. Many folks might not realize it but they’ll have inner resentment of me but that’s not fair. I’ve worked hard in my career over the years, saved, invested like everyone else here in the FIRE community. I never had a spoiled-brat attitude that I was going to inherit a fortune. I assumed my Father would leave everything to my Mom, and the majority of his estate went to her and fortunately for me, he didn’t leave me out. I consider this a Blessing and I am thankful for it everyday in my prayers.
I’ve kept that money conservatively invested (probably too conservatively) and I’ve almost doubled this amount in capital appreciation in four years.
The pint of all of this is that there re probably many among us who will inherit a sum from a loved one. My advice to them is twofold. First: DO NOT TELL ANYONE! Keep it to yourself, otherwise you’ll have many requests for loans.
SECOND: Don’t make any drastic charges in your life. Pay off your credit card debt and car loans but otherwise DON’T make any major purhasss or do anything with the inheritance that you’ll later regret.
ESI Millionaire Inteview # 49 features me in the interview and I provide this advice.
I remember your interview and the advice you give sounds sage to me. Especially about not changing lifestyle. It’s really the same advice that many pf bloggers give when you get a raise or a big bonus at your job. The best thing to do is bank it and keep living like you are, but that’s soooo hard for people to do. I guess they feel they deserve to spend more or have more things, w/out asking if those things will make them more happy.
You’d take a bullet for one of your best friends, but not leave them an inheritance. That’s interesting. It sounds backwards at first glance, but I think I’m in the same camp. My saying is “Inherited money is poison, get rid of it!”, which is sort of a joke to just spend it all if you happen to get some. Mostly because I think that money you don’t earn from work or investing might have a bad influence. Sort of like winning the lottery.
Susan,
You need to read this: https://firechecklist.net/2018/03/17/the-art-to-saying-no/
This will explain it ALL. My inheritance wasn’t a poison at all. It allows me to retire way before 65. I don’t plan on spending it on “stuff.” I’ve invested in and set it in safe keeping and I’m damn sure not going to loan it to anyone. I realize lots of folks don’t like inheritance and you may be one of those folks. Just like some feel it’s not fair, the same ones that believe in that Mumbai Jumbo wealth distribution. It seems everyone hates the affluent and would like to get their fair share and have the well-off subsidize the life of the poor, etc etc.
I don’t want this to turn into a lengthy dialogue. We all have our own beliefs and I have mine. The simple fact is that we are in the FIRE community. This means that the only way any of us will retire early is by millionaire status. You have to be a millionaire to be “on FIRE.” Most of society who are mortgages to the hilt, overextended, etc. don’t like millionaires and therefore won’t like us on FIRE either.
THIS IS ALL SO CONTROVERSIAL but it doesn’t have to be. Work your ass off, save, sacrifice, be frugal and if you’re fortunate enough to inherit some, parlay that sum into your early retirement goals.
Woah woah, there’s a gen Z?! AND THEY’RE 23?!? I must be on the tail end of the millennials then as I’m 26. I never thought of it that way. My kids someday might be too late to count as Zers but I do talk of leaving an inheritance…but if they think they’re getting our money automatically they need to open their eyes to who their mother is.
Ha, if your kids think they’re getting anything you can show ’em that can of gif whoop-ass from you post today!
And yes, you are one of the younger millennials. Think about it Lily, you could be the bridge to the Gen Zers – teach them frugality and financial badassity!
i listed my 2 best buddies as beneficiaries (after mrs. smidlap, in case the plane goes down or the car flips over with us in it). they’re like brothers to me and been there since childhood. plus, my side of the family tree is pretty messed up. those guys will know what to do with it. to each his own. those young weasels in the survey, well, i’m at a loss with that one.
wow, that’s really cool freddy, this is why i love comments!! it seems to make sense in your situation and to be honest my situation isn’t much different. i have a very small family and no kids myself. come to think of it, i could actually see myself thinking of this one day…
No inheritance coming my way ever. I am the most financially stable child out of three in my family, and my parents are most likely going to live with me when they can no longer care for themselves. My boyfriend’s family is in the same situation. His mom (widow) already lives with a family member and could eventually be living with him as time goes on. I’m 28 and still paying off debt etc., with zero emergency fund savings or house fund.
I’m also the only family member with a decent life insurance policy, and I do have my best friend listed as a beneficiary (a small chunk compared to what my family will receive, but still a nice chunk of change). I think people in the military are very generous with their life insurance policies because your co-workers become like family. It’s a tight community.
Still, the whole line of logic seems foolish. Then again, I know my ex-husband expected some money from his parents when they died… Maybe that’s why he was terrible with money?
Caring for parents is a big deal, my Mom is 89 and things are getting more serious for me in that arena. That’s awesome that you have your best friend as a beneficiary too! And yes, I work with military often and they do treat each other as family!
It is interesting because I agree I think the younger generation just expects things to be given to them. I am trying to leave a financial legacy for my daughter (12 yo) but will not sacrifice my own retirement to fund that. After reading that generational wealth typically gets lost by the 2nd generation and 90% by the 3rd I am less inclined to try and save something to pass on if it is just going to get wasted away later. If they don’t realize the hard work it takes to make wealth and just given it they will never retain it
I had never heard that stat about generational wealth getting lost. Interesting.
Thanks for the comment!
It saddens me to thing that people are you banking on an inheritance? For a few reasons.
1. the price of houses and land here in NZ have gotten so expensive that for some people inheritance will be the only way they get into owning property. Although, I would argue that they need to spend less on other things. But if you are a farmer like my brother’s you need to fine 2 to 3 million to own a farm.
2. I want my parents to enjoy there retirement as much as possible. I tell them that they have saved that money over a lifetime of work. And they should do what they want with it. And I don’t expect them to leave any for me. They love to travel, I encourage them to go on as many trips as they can. They earned the money, and they should enjoy it.
3. I agree with xrayvsn’s comment. People who inherent money don’t appreciate the hard work it takes to save it. Its similar to lottery winners who tend to be worse off several years later after a big win.
Wow, that sucks about NZ land. It is beautiful though, you get a lot for your money 🙂
Thanks for your comment and subscribing!
interesting post as you did ever. i like this post
Thank you for sharing great post about baking on inheritance
I lean very socialist on inheritance – I don’t believe in it and think it should all go to the state or charity. If I get one, I will give it to a feminist or cat charity. My parents both own their homes and have a little bit of savings, so it all depends on how long they live and care costs. I’d much rather they spent it all and enjoyed their later years.
And as for Gen Z leaving it to kids – why not? At the age it;s very unusual to be married, so friends are really your family? And why does society feel we should support family, but not friends? Is there a logic to it? Passing wealthy by family seems set up to benefit the rich, similar to inheritance, why no do it bu friends you choose instead?
You make a good point about the general consensus of supporting family (as assumed) vice friends. I think much of that obviously comes from human nature – family is blood and there’s a psychological tie that runs deep. Especially with parents and offspring. It’s like love – medical science can’t explain it or measure it.
But logically, as you point out, it doesn’t make as much sense. Some parents treat their kids horribly and vice/versa, so why would you give them money.
I suppose you’re anti-wealth too (in addition to being a socialist). Why in the Hell do you read and frequent early retirement blogs? Inheritance should go to the state? For what benefit? Government fails with money, City and state. Case in point, the pension crisis, which are run by “the state’s.”
Rethink your thinking and logic because its severely flawed. The government squanders all revenue. Your estate, your parents, mine should be passed on not given to the state.
This is pretty interesting, I didn’t realize I was one of the younger millennials! (Since like you mentioned most articles reference millennials as the youngest – probably because it’s a fun word to say and makes for catchy headlines)
I’m not banking on an inheritance even though my parents are doing pretty well for themselves. I’m hoping they spend that on themselves during retirement over the rest of their lives instead of passing it down because they absolutely deserve it!
“I didn’t realize I was one of the younger millennials!” Damn you – enjoy it!!!
This blog posting started out with an observation of young people today are banking on an inheritance. Maybe they work less hard or have no aspirations. I don’t know and all I can tell you is that as a Cynic, I really have no faith in the future direction of millennials anyway. It’s the parents’ faults and the fault of this overly-sensitive society as a whole. I call it the “pussification of America.”
Hate to offend anyone but I’m being “for real” and stating an ovsrvation I made several years ago. Things are getting worse as one moves along, not better.
On a separate note, on inheritance. I inherited $1 million of an $8 million Estate, $7 of which was left to my Mother. When she passes I’ll inherit thatvestate. What is wrong with that??? By the sound of some of the comments, you’d think inheritance is evil. WTF! Would you expect the entirety of this estate to simply be passed to the frivolous government? That makes no sense. This is the debate at hand. Not millennials. It’s about estate taxes, estate planning, leaving wealth to the next generation. Would you rather your Responsible, adult children (I’m 51 and I work like a Hebrew Slave!) revive an inheritance or would you rather your estate pass to this free-wheeling, Government? The antithesis of frugality?!
My job has hired a ton of millennials in the past 5-7 years, and I have to say, I’m surprised by how hard they work. That said, I do see a trend that many expect to get promoted very quickly, and we have to tell them that it just doesn’t work that way.
You have a point about inheritances having to go to someone. It’s not fair for the government to take or tax money they’ve already taxed, for sure.
Damn millennial’s need to learn how to work hard.
Ha, I said they DO work hard, they just want instant promotions 🙂
Finally we can start hating on the new generation!
You guys have to find some food trend the Gen Z kids have so you can give them the crutch of their avocado toast!
Chiming in with yet another “huh, didn’t realize I was a baby millennial!” comment.😬
I notice there that we millennials aren’t generally expecting an inheritance (or rather, fewer of us are than Gen X), which is interesting. I don’t know if that’s general cynicism about our financial situation or something else.
My parents will get something when my mom’s father dies. I have no idea if some of his money will come to us grandchildren (I want to say some of the money in my grandmother’s trust might skip a generation and come to us instead?), and while that would be nice, I’m not banking on it. I’d rather my parents get it and be set for their retirement with all they’ve done for us kids in terms of support and paying for quite a bit of our college educations. My parents have been talking for years about buying a plot of land where they can put a huge garden and install solar panels. I’d love to see that happen before they get too old to enjoy it.
If I were in your situation I’d do the same – pretend it ain’t coming and don’t consider it part of your plan. That’s also how I treat social security. Anything is a nice surprise when you planned to NOT have it.
I hope your parents get their garden – have them talk to Angela 🙂
Nice article. Why aren’t we teaching our kids to be awesome creators so they can leave an endowment for future generations instead of being consumers looking for handouts?