As we enjoy the lazy days of summer, children expend their energy on camps, vacations, visiting family, hanging out with friends, and enjoying freedom from homework. In this blog, I would like to give you, as parents and grandparents, something to think about as we wrap up the summer.
I have worked in financial services for more than four decades. In our industry, the term investment usually refers to traditional financial instruments like stocks, bonds, and cash. On the other hand, the term alternative investment refers to an asset that is unconventional, such as private equities, hedge funds, real estate, or commodities. These investments are complex in nature, have limited regulation, and differ from typical stock and bond investments in regard to their returns and time horizons.
I would like to encourage and challenge you to consider a different type of alternative investment—an investment in your children and grandchildren (aka a posterity investment). Based on the potential returns of these investments, I don’t think you will regret it.
As a grandpa myself, I must admit that this concept of investing in the next generation was not on my radar for a long time. I was focused on saving for retirement and accumulating assets to leave to my children or grandchildren, which required me to invest in typical financial instruments (aka a prosperity investment). My default, which is probably the case for you as well, was to invest any surplus margin or savings in traditional financial investments, such as a personal or retirement account or use it to pay off debt.
Once I realized that I could invest surplus money in my posterity (children and grandchildren) and not just default to traditional financial investments, my wife, Julie, and I began asking a different question. We pondered, “Is there a way to use some of our assets to build more spiritual and social capital into the next generation?” We wondered if there was a way to utilize our wealth to teach character qualities and pass along our values and ideals to our children and grandchildren.
The result of this discussion was a line in our budget called “posterity,” which represents a predetermined amount from our surplus earmarked to invest in our children and grandchildren. Similarly, to how you may plan to put $2,000 in your IRA, you establish an amount that you will invest in your posterity.
There are countless ways you can make this investment. Here are some examples of posterity investments Julie and I have made:
- Paid our children for Scripture verses they memorized
- Compensated them for book reports on books we recommended
- Covered the cost of a marriage retreat
- Funded mission trips to third-world countries
- Matched funds saved for a car if they received a college scholarship
- Provided a boat for a day at the lake for us, our kids, and their friends
Now as grandparents, we are finding new and meaningful ways to invest in a new generation. We have begun hosting an annual “cousin camp” when we keep all of the grandchildren for a weekend and gift the parents some time to themselves. We cover all of the grandkids’ expenditures for the weekend as an investment in the next generation.
In the past I would have considered most of these costs expenses rather than investments. Many of them might increase our living expenses or seem like a frivolous use of money, but categorizing them as posterity investments can cause us to view them differently. The posterity line in my budget is right before my 401(k) contribution. I see them both as important investments.
I have shared some of the alternative investments Julie and I made to challenge your thinking and give you some illustrations of potential posterity investments. Tailor your ideas to the ages and interests of your family. Think of activities you enjoy and what benefits or memories you would like to pass on to your children and grandchildren.
Remember by definition an alternative investment is complex, unconventional, and has a longer time horizon. That concept is key. You are making these posterity investments to build a long-term return on the spiritual and social capital of the next generation. These investments will most likely not yield quick returns. Your friends and family may view them as unorthodox and question why you are not putting your money in traditional investments that focus on retirement and savings. However, let me encourage you: As I look back at our spending over the years, I have no regrets that we made posterity investments in our family. We might have gained more financial capital if we had invested differently but seeing the social and spiritual capital returns in the lives of our sons and now our grandchildren is priceless and cannot be quantified on a balance sheet. I challenge you to make some room in your portfolio for posterity investments and intentionally invest in the future of your family.
At Blue Trust, we seek to help our clients better steward their money so they can live a life well spent. For more information or to connect with an advisor, don’t hesitate to reach out to us at 800.987.2987 or email@example.com.
Content adapted from Your Life…Well Spent by Russ Crosson.