Currently in Australia, around 15,000 people pass away each year and bequeath their wealth to others, usually family members. When we analyse the numbers, they suggest around $6 billion is inherited annually through this means, usually to the children of deceased parents, who themselves are predominantly in their 'baby-boomer' years.
This money which is inherited is then used for many varied purposes, be it an injection to current savings, used to pay down debt and lower mortgages or it is spent on lifestyle items such as travel, cars or home renovations.
Increasingly today, the question arises with regard to the investment of this money including the recipients of this wealth assisting their children to fund an investment property or home for themselves and for their family.
When you break this figure down apportioning funds inherited in Western Australia, it suggests around $700 million per year or some $13 million per week becomes available to the surviving relatives.
In shifting a sizeable amount of money in any direction on an ongoing basis causes trends and can create its own market.
It is an interesting trend to note that in light of the current uncertain economic times, people are tending to save a portion of their inheritance rather than spend to the extent of previous levels.
Additionally, given the current strong Australian Dollar, many people are taking advantage of cheap overseas travel and are spending a portion of the inheritance on overseas travel, somewhat irrespective of a strong Australian Dollar.
In fact, when we look at where the inheritance money is going, it reflects the spending and saving habits being witnessed today, which are reasoned by our current economic times.
Perhaps some of these financial trends and patterns we are seeing are not just a reflection of our economic times but rather an indication of the prudent use that the recipients are doing with their inheritance money.
What is happening with the use of this money is clear to see but why it is happening gives us a far deeper understanding. If we see the "what" is happening but get the "why" it's happening wrong, then we can miss the reality of the situation and this will lead us to incorrect assumptions and forecasts.
Perhaps we should just be aware of both of these reasons to explain the current trends and pose the question, "If this were the reason for the current patterns of saving/spending behaviour, where will this leave the economy and what impact does this have?"
The inheritance boom is a lot larger in its nature than the economic cycle. Possibly these trends of saving, paying down debts, buying lifestyle could end up being somewhat longer term in their nature.
Only time will tell, but I leave you with this thought...
"If you were to inherit $300,000 today what would you do with it? Would this answer be different to how you would have answered the same question say 5 years ago?"
Perhaps investing in the areas where this money is being channelled, and going to continue to be used is the best use of part of investing your inheritance.
Article Source: http://EzineArticles.com/?expert=Gavin_Hegney
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