Financial organization, or financial literacy, is an important set of skills to develop, at any age and stage of life. The reason? Our lives are in constant flux. Nobody *really* knows what tomorrow will bring, and while it’s difficult to have conversations about where the wealth goes once someone passes, getting everyone involved in generational planning will limit any surprises, keep everyone in the loop, and ultimately increase your peace of mind.
So, whether you’re in your 40s with young kids and looking to set up a will, or curious about how your parents’ or grandparents’ inheritance will affect you, it’s always important to be aware of the financial climate so you can make moves from a place of power.
Plus, knowing some of the basic terminology always helps when explaining things to those younger than you (so you can pass on your knowledge to the next generation!)
Financial Literacy: The basics
Basic financial literacy applied in everyday life includes banking, budgeting, investing, and managing debt and credit. But it often begins with a foundational understanding of the Time Value of Money.
The Time Value of Money (TVM)
This is the idea that there is more benefit to receiving a sum of money now than receiving the same amount later.
In other words, money in the present is worth more than the same sum of money in the future, since the money you have RIGHT NOW can be invested and accrue interest over time. Money in the future can become devalued with inflation.
We know inflation affects our day-to-day purchasing power, but it affects our long-term financial plans as well. Although we know the value of our assets today, we can never predict with absolute certainty what their value will be down the road. This makes managing your finances today even more of a priority.
Generational Planning for the Future: Creating a Will
There are different types of wills, but a simple will is enough for most people. Your will sets up your legacy. Make sure you speak with a financial planner to settle on which type of will is right for you.
From here you’ll decide which assets to include in your will. These are things like property, bank accounts, family heirlooms, even pets.
Next you’ll decide who will receive your assets, as well as a trusted executor to make sure everything is distributed according to your wishes.
Updating Your Will
It’s important to update your will whenever a big life change occurs, or even every five years or so to account for things like inflation. Whether it’s a big move, having children, a marriage – it’s important to keep on top of your will to ensure your legacy reflects your wishes at the time. Staying on top of these things can translate into seeing your children and grandchildren enjoy an inheritance, and knowing they’ll be cared for in the future.
We realize this is a lot of information, but rest assured, we have many reliable, professional contacts who specialize in legacy planning, to whom we can happily refer you!
If you’re interested in a referral, or just wish to have a chat about financial organization, please reach out and book a free consultation with Steven today.