By Mallika Mitra

Financial advisor Patti Black works with a 36-year-old small-business owner who has two surprising employees: his three-year-old and six-month-old children. The pair are featured in photos used to market the business, which creates handmade products.

Black says her client is employing his minor children so they can have earned income, and he can make Roth individual retirement account, or IRA, contributions on their behalf.

"It was drilled into his head by his parents the importance of saving and investing early, and he wants to go ahead and do that for his children," says Black, who works in Birmingham, Ala., for Savant Wealth Management.

Giving money to the next generation while still alive is a more common move for young people now than it was for older generations. Wealthy people ages 27 to 58 are more than twice as likely to say they want to share their wealth with the next generation during their lives compared with people ages 59 to 76, according to a recent survey from Charles Schwab of people with at least $1 million. Those wealthy older people are more likely to say they want to enjoy their money themselves during their lifetime.

Financial advisors say this isn't just a question of one generation being more generous than another. Instead, a series of financial crises instilled a fear of losing it all in older generations, while the soaring costs of living has younger generations fearful for their children's future.

Older generations heard firsthand accounts of the Great Depression, which led them to believe that anything could happen -- including losing all of the money they have carefully saved, says Mitchell Kraus, financial advisor and co-founder of Capital Intelligence Associates. Their approach to inheritance is that they should hold on to what they have while they are alive, just in case their fears come to fruition.

Take one of Kraus' clients, a woman in her 90s with more than $10 million. She and her late husband wanted to help their children buy a home, and they were certainly able to do so. But instead of giving their children money for a mortgage, they gave them a loan.

"They're from the World War II generation," Kraus explains. "They were really worried that someday they'd run out of money."

There's also a generational difference in how taboo it is to talk about money, which plays a role in the trend: A recent survey from Fidelity Investments shows that while more than half of Americans say their parents never discussed money with them, the tides are turning. Four out of five people now say it is important to talk to young people about the once-taboo subject.

Kraus has another client who exemplifies this old-school taboo. The matriarch of the client family has a net worth of roughly $12 million, and while she has set aside money for her two adult daughters, she is keeping that move a secret. She doesn't want to make promises she can't keep, and she is used to keeping financial information private, Kraus explains.

But when the family's first granddaughter recently started college and the matriarch said she would contribute $40,000, her daughter (the mother of the college student) was surprised.

"The daughter and her husband have been struggling for years to set aside money for college, and it turns out they didn't have to do that," Kraus says. "As the financial advisor, I have encouraged her to put less in the college funds than maybe I would recommend to most clients...but I didn't have permission to share that the first $40,000 of college is taken care of."

It also is hard to switch from being net savers to net spenders, says Michael Lofley, a financial advisor at HBKS Wealth based in Stuart, Fla. "Many of our clients came to be millionaires via years of diligent saving and investing," he says. "When those types of people hit retirement, it is hard to unlearn old habits."

Gen Xers and especially millennials who have grown up amid skyrocketing costs take a different approach, since they see how hard it is to get a start in society, Kraus says.

Affording a house, for instance, is more difficult than ever. The median sales price of a home was $427,000 in December versus just $169,000 in 2000, according to the Census Bureau. Meanwhile, the average annual tuition and fees at a public college were $9,750 for the 2022-23 school year compared with just $3,501 in 2000, data from the Education Data Initiative show. Younger generations have weathered their fair share of recessions and even a pandemic, which has resulted in them being less worried about the economy falling apart than their older counterparts.

"They're much more concerned about helping their children fight for that American dream than worrying about running out of money," Kraus says.

Even if that fight starts, like Black's client, when those children are still in diapers.

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February 21, 2025 02:00 ET (07:00 GMT)

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