What We Leave Behind: Why financial knowledge should be part of your legacy

When we talk about leaving a legacy, the conversation often turns to the things we can see and measure: a home, investments, a family business, an inheritance, or perhaps a gift to a charity or community organization that has been important to us. These are all meaningful parts of a financial legacy, but they aren't the whole story. Some of the most valuable things we pass from one generation to the next never appear on a financial statement.

Financial knowledge is one of them.

Grandmother and granddaughter having conversation

Helping young people develop a healthy understanding of money gives them more than the ability to create a budget or understand an investment account. It gives them a foundation for making decisions throughout their lives. They begin to understand that financial choices involve priorities and trade-offs, that saving creates future options, that debt has a cost, and that building wealth generally happens through a series of good decisions made consistently over a long period of time.

Those lessons are especially important today. Young people have access to more financial information than any generation before them, but more information doesn't necessarily mean better information. Social media can make investing look easy, debt can feel almost invisible when purchases are made with a tap of a phone, and there is no shortage of people online promising shortcuts to wealth. Learning how to think about money critically may be more valuable than simply knowing where to find information about it.

Financial education doesn't have to feel like a lesson

Parents and grandparents sometimes assume that teaching young people about money requires a formal conversation around the kitchen table. Those conversations certainly have their place, but much of what children learn about money happens more naturally. They watch how the adults around them make decisions, hear conversations about what things cost, and gradually form their own ideas about saving, spending, generosity and wealth.

That creates plenty of opportunities to include young people in age-appropriate financial conversations. Explaining why you're saving for a purchase instead of putting it on credit, talking about why you contribute to a TFSA or RRSP, or discussing how you decide whether something is worth the price can turn an ordinary moment into a useful lesson.

As young people get older, the conversations can become more practical. Some of the fundamentals worth helping them understand include:

• How to manage a first paycheque. Seeing the difference between gross income and take-home pay is often a young person's first real introduction to taxes and deductions.

• The difference between saving and investing. Both are important, but they serve different purposes and come with different considerations.

• How credit works. Understanding interest, minimum payments and credit scores before getting a first credit card can prevent some expensive lessons later.

• The value of starting early. Even modest amounts invested consistently can benefit from having time on their side.

• How to separate wants, needs and priorities. Good financial planning isn't about never spending money. It's about making sure your spending reflects what matters to you.

• When to ask for help. Financial confidence doesn't mean knowing everything. It includes recognizing when a decision is important enough to seek reliable advice.

None of these conversations requires a parent or grandparent to have made perfect financial decisions themselves. In fact, sharing a few of the lessons we've learned the hard way can sometimes be more useful than presenting ourselves as people who always got it right. Most of us can think of a purchase we regret, a savings habit we wish we'd started sooner, or a financial decision we would approach differently today. There is value in passing those lessons along too.

Give young people room to make their own decisions

Understanding money in theory is one thing. Making decisions with your own money is another, and that experience is where financial confidence often begins to develop.

An allowance, a summer job, birthday money or a first regular paycheque gives a young person the opportunity to make choices while the consequences are still relatively small. If they spend too much and can't afford something they want later, that can be a useful lesson. If they save for months and finally buy something important to them, they learn something different: patience and planning can be rewarding.

The goal doesn't have to be creating a perfect young saver who never spends a dollar unnecessarily. Adults don't live that way, and expecting teenagers to do so isn't particularly realistic either. The better goal is helping them understand the connection between today's decisions and tomorrow's choices. Over time, that way of thinking can become far more valuable than any individual money rule.

Passing on wealth means passing on responsibility

For families who have spent years building wealth, financial literacy becomes an important part of the legacy planning conversation. We spend a great deal of time thinking about how assets will eventually pass to children or grandchildren, how taxes will be managed, and how an estate can be structured efficiently. Those are important questions, but there's another one worth asking: Will the next generation be prepared for what they receive?

An inheritance can create opportunity, security and freedom, but the people receiving it also need the confidence and knowledge to manage it thoughtfully. That preparation doesn't have to involve telling children or grandchildren every detail of your finances. It can begin with conversations about the values behind the decisions you've made.

• Why was saving important to you?

• What sacrifices helped you build what you have today?

• Why did you choose to support certain causes?

• What does financial security mean to your family?

• What mistakes taught you the most?

• What do you hope the wealth you've created will allow the next generation to accomplish?

Those conversations can give financial assets something numbers alone cannot provide: context. They help the next generation understand not only what is being passed along, but why it matters.

A legacy they can use for a lifetime

Financial literacy isn't about raising children who spend their evenings studying investment statements. It's about helping young people become comfortable asking questions, weighing their options and making informed decisions. Some will become interested in investing early. Others won't. Some will be natural savers, while others may need more encouragement to think beyond the next purchase. That's all part of learning.

What matters is giving them a foundation they can build on as their lives become more complicated. Eventually, the decisions will become bigger: education, careers, homes, relationships, children, businesses, insurance, retirement and perhaps one day an inheritance of their own. The earlier they become comfortable thinking and talking about money, the better prepared they can be for those decisions when they arrive.

At Life & Legacy, we believe financial planning is ultimately about helping people use their resources to build the life they want and take care of the people and causes that matter to them. When we look at legacy through that lens, passing wealth to the next generation is only part of the opportunity. Helping them develop the knowledge and confidence to make good decisions with it can be every bit as meaningful.

Every generation leaves something behind. Along with the assets we've worked hard to build, perhaps one of the most valuable things we can pass on is the wisdom to use them well.