Parents spend years building and protecting wealth that they one day hope to pass on to their children. But as they dig into that planning, fear starts to creep in. They’re worried that, lacking proper experience or financial education, their children will fail to preserve their family’s wealth for future generations—or even worse, squander it.
They want to broach the subject with their children, but they’re unsure how to begin that conversation or what resource they can offer them that covers all the bases.
That’s why Roger and Lori Gervais wrote Pass It On—to show people how to transfer not just their wealth, but also the family values that will enable future generations to preserve and grow what they’ve built. Mixing financial knowledge with client stories and nuggets of wisdom, Roger and Lori will set readers up for success as the steward of their family’s wealth and give them the peace of mind that their children are prepared to inherit that responsibility. I caught up with Roger and Lori to learn more about the book and the ideas they share with readers.
What happened that made you decide to write the book? What was the exact moment when you realized these ideas needed to get out there?
Not long ago, a person we cared about greatly was diagnosed with an aggressive form of cancer. This person was a major influencer in our lives and around our same age. His children are the same ages as our children. Our community rallied around his family and had high hopes for his healing.
Unfortunately, it was only a matter of months from our friend’s diagnosis to his passing. The two of us were shaken by his death. We realized that either one of us—or even both of us—could go at any time. We began to think about all that we still wanted to tell our kids, and felt new urgency to make sure they would be taken care of. Given the business we’re in, we had already set up our guardians and overall estate planning—but there was more we wanted to do for them. We wanted to make sure our kids would have a way to understand our values and become financially literate.
Suddenly, this book came to the forefront of our conversations. The two of us could think of all sorts of lessons that we still wanted to share with our three children. What if we were denied that opportunity? Whether they were learning lessons about money, or life, or morality—our kids would gather influence from someone. We wanted them to get those lessons from us.
Some parents are experts in medicine, or construction, or education. Our expertise is in finance. That’s the subject where we most want to pass on knowledge to our kids. However, at age three, Jack wasn’t ready to comprehend a concept like compound interest—so we decided we’d better get it all on paper.
What’s your favorite specific, actionable idea in the book?
The concept of the Family Bank, which is easy to scale up. Anytime parents give their children loans, they’re using the same concept of the Family Bank. Using their own capital, the parents are able to give their children more advantageous rates than if their children were getting loans.
Here’s how this might work:
Provide a loan to your grown children from the Family Bank for a “big ticket” item, with better interest rates than a bank loan. If your child wants to buy a car, or needs help with a down payment for their first house, it’s a common time for parents to give financial help to their kids.
Do yourself and your child a favor, and formalize this agreement. By writing out terms and a contract, you not only help educate your child about the way the loans work, you also create some healthy boundaries and clear expectations. Those terms will provide accountability to your child and encourage them to be responsible, while also giving them healthy “real-world” practice in meeting regular loan payments. However, by giving them an improved interest rate over a bank, you’re still providing generous help.
Provide a business loan to your children. Parents with enough liquid capital may have the resources to give their children a large loan direct from their own Family Bank. You have the opportunity to dialogue with your child about money. Your partnership with them also opens the door to talk about other financially-related issues that would normally be taboo—like, “Are you paying your bills? What is your salary?” If your children want your financial help, offer it to them in dollar bills AND education.
What’s a story of how you’ve applied this lesson in your own life? What has this lesson done for you?
Around the time we set up our kids’ allowance Mason jars, we had to talk about what we were going to do with the money that went into the “Big Savings” jar. We agreed that, given our kids’ young ages, we would invest the money for them. But how?
When we started the process with Anna at age five, we felt she was too young to have her own savings account in a bank—and, to be honest, we didn’t want to bother driving her to the bank to make a formal deposit every time she got her allowance! Besides, we mused, the interest rates on savings accounts were so low, we weren’t confident she would be able to recognize the value of leaving her few dollars in the bank.
Thus, our version of The Family Bank was born, which is mainly characterized by an Excel worksheet, and spectacular interest rates. Here’s how it works:
When Anna and Will put their money in the “Big Savings” jar, we “deposit” their money into our Family Bank, which basically means they hand the money back to Roger. We calculate their new balance and give them a balance receipt via an Excel spreadsheet. In order to help our kids recognize that money in a savings account earns interest, we pay them 10 percent annual interest. Admittedly, that’s far above current market rates, but it’s big enough that the kids take notice—especially when they see the effect of compounding interest.
Because Anna is able to see how noticeably her account is growing in the Family Bank, she is able to weigh that investment over the temptation of an impulse buy. On a recent Target trip, when we asked her if she really wanted to buy those unicorn socks, she thought about it and then said, “Nah. I think I’ll leave my money in the Family Bank instead.” Success!
When our kids want to buy a big-ticket item, we walk them through making a withdrawal. We calculate their new balance, give them a receipt, and then give them the cash they’ve “withdrawn.” On a practical level, the actual cash is either deposited or withdrawn from our own wallets or bank accounts. We simply keep track of the money for them, and grow it, through our Excel spreadsheet calculations.