If you have done any reading on financial planning, you have heard it said that young adults are in the most expensive period of their lives. This period stretches between the age of 18-35 and includes lifestyle and financial milestones that play crucial roles in a person’s long-term health, wealth, and success later in life. This is a time for everyone to spend money on advancing themselves for the future and make mistakes in the process. Learning lessons and burning cash are the name of the game for young adults whether they like it or not.

Not only is this a time for learning, but also a time for spending. A person in this early “development” stage of their wealth is spending significant money on a whole lot of projects. They could be pursuing higher education, purchasing their first home, setting up their first investment accounts, starting their family, or even starting their first business. All these projects require intense capital to initiate and complete. Herein lies the potential for mistakes to happen. We are all impatient at times, and the allure of the get rich quick schemes, “sure thing” opportunities, and high-risk investments may as well be siren calls to cash strapped young adults.

                I will preface this by saying I believe it is good and perhaps even necessary to make mistakes early in adult life. For example, it is often those youngest investors who are most interested in the riskiest investments, they want to make a small investment that will balloon in size so that they can profit quick and skip the hard work that we all know is truly necessary to get ahead. I for one, would rather a person make a risky investment like this when they have a small amount of money available to them. Losing a small amount when you don’t have much hurts just as much as losing a fortune, so on a cost per lesson basis, it is better to lose a small amount of your small savings and learn that lesson relatively cheaply than it is to learn that same lesson after you have amassed or been gifted a large amount of wealth all at once. Smaller more incremental lessons can be learned at this scale and then applied later to a larger scale of wealth. Any number of factors can influence how or when these lessons get learned, the only part we have any control over is our reaction to the ups and downs of investing and how careful we are in applying the lessons learned to the future.

                Occasionally it can be hard to convince the parents or grandparents of young adults that this period in life is a necessary step to becoming successful long term. It can be hard to remember that when any of us was at this stage of our life we too were taking risks, making mistakes, and learning lessons we have carried with us since. If you are healthy, wealthy, and wise today it is because earlier in your life you made calculated decisions, many of which worked out, but similar number which were mistakes. I am sure some decisions you made when you were young, looking back you wish you could tell yourself to choose another path or make a different choice. Unfortunately, it is impossible to download these lessons learned into the brains of our loved ones, our children and grandchildren are not us, so we need to allow them to learn these lessons as they come, rather than attempt to protect them from every undesirable outcome. In a worst-case scenario, you protect them your whole life and when you pass, they end up making mistakes with the inheritance left behind to them.

                So, what can one do to improve the financial outcomes of their offspring? First, it is important to share information and access to experts when possible. If you have an advisor, accountant, lawyer, etc.,  you trust to give you good advice be sure to share that relationship with your kids. Second, being an open and receptive confidant will encourage communication and opportunities for learning. Attempting to force someone to listen to a lesson learned years ago does not make much of an impact, but being available to discuss when has occurred and sharing advice when it is asked for can be beneficial. Finally, try removing judgment when discussing financial decisions made. This could be anything from picking a stock to spending on a new car. When people feel judged, they tend to share less. Being judged for our decisions tends to make us dig our heels in even when we already know we have made a mistake.

In the end, everyone’s financial path is winding, that is what makes it so hard to see where we came from and the lessons we learned along the way. If you have questions about how you should start approaching the wealth transfer conversation with your kids, give us a call at 403-260-0568 or reach out via our website: www.kozakfinancialgroup.ca