BY WEALTH ADVISER
Many Australian parents are on track to leave far more to their children than they themselves received, as an estimated A$5.4 trillion of wealth passes between generations over coming decades. Yet a growing body of research suggests younger Australians feel overwhelmed by money, lack basic financial capability and may not be ready for the responsibility that comes with a substantial inheritance. The core question is shifting from “how much will I leave?” to “will my children be able to manage it wisely?”
A recent Firstlinks article on the inheritance “stress test” uses Warren Buffett’s line about leaving children enough to do anything, but not enough to do nothing, to highlight this tension. It argues that readiness is not about age or education alone, but about attitude, judgment and the ability to cope with pressure when the stakes are high. These qualities rarely appear overnight when a will is read; they are built gradually, through experience and deliberate preparation. For Australian families, this means testing capability before money changes hands, not discovering gaps after.
What the inheritance ‘stress test’ really asks
The stress test outlined in the Firstlinks article proposes six questions for parents to consider before wealth moves to the next generation. The first is attitude. Do your children display humility, curiosity and respect for the effort that created the wealth, or do they treat it as a shortcut or entitlement? Heirs who see an inheritance as fuel for opportunity are more likely to preserve and grow it; those who see it as a windfall to be consumed are at greater risk of depleting capital quickly.
The second question is whether adult children are stable and self‑reliant in their own lives. If they can manage work, bills, relationships and day‑to‑day responsibilities without parental rescue, an inheritance may strengthen a solid foundation. But if they are informally relying on the “Bank of Mum and Dad” as Plan A—expecting a future lump sum to solve current issues—then more preparation is needed before adding more leverage in the form of wealth.
Third, the article asks whether children genuinely understand and live by the family’s core values. Money creates choices; values provide direction. If heirs are clear about why the wealth exists, what their family stands for and how it defines “enough”, they are better equipped to make decisions that honour a legacy. Without that anchor, inheritances can drift into conflict, unfocused spending or support for ventures that run counter to the family’s intentions.
The remaining questions focus on practical capability. Can your children make decisions confidently without constant validation, while also knowing when to seek specialist advice? Are they prepared for the specific risks that come with wealth—scams, predatory relationships, pushy investment opportunities, social pressure? Finally, are they financially literate enough to understand compounding, inflation, risk, tax and the crucial difference between lifestyle spending and capital that needs to last for decades? If the honest answer to several of these questions is “not yet”, the inheritance timeline and preparation plan may need adjustment.
Young Australians’ financial reality
These concerns are not theoretical. Moneysmart data released by ASIC shows that young Australians, particularly women, report high levels of money‑related stress. One recent survey found that around 62% of young women and nearly half of young men feel overwhelmed by financial decisions, and many lack a savings buffer or clear plan. The same research highlighted higher use of buy‑now‑pay‑later and other short‑term credit among younger cohorts, alongside lower confidence in investing.
Broader studies on the financial literacy of young Australians paint a similar picture. Research by the Financial Basics Foundation and others has found that a large proportion of teenagers and young adults struggle with core concepts such as budgeting, interest, diversification and risk. Many can complete simple maths questions but falter when those questions are framed in real‑world money terms, like comparing loan offers or understanding what happens if a repayment is missed. Academic work on behavioural biases and retail investors adds that overconfidence, herd behaviour and present bias can further undermine outcomes, particularly when windfalls arrive suddenly.
Meanwhile, articles from Australian advice firms and philanthropic organisations warn that the coming A$5.4 trillion wealth transfer is a “generational tragedy” in the making if underlying capability issues are not addressed. They point to international and local examples where fortunes have been squandered within one or two generations due to poor decisions, family conflict or lack of shared purpose. Against this backdrop, the inheritance stress test becomes less a theoretical exercise and more a necessary risk assessment.
Building readiness before the money moves
The good news is that readiness can be improved. The Firstlinks article emphasises that the right questions, asked early, give families time to build capability long before wealth changes hands. One practical starting point is to move beyond silence or vague assurances and begin age-appropriate conversations about money, work and values while children are still forming habits. Discuss how the family’s wealth was created, what sacrifices were made and what responsibilities come with it, rather than only the numbers.
Another step is to gradually increase responsibility. This might mean giving adult children control over a small investment account or “practice portfolio”, with guidance and regular check‑ins, rather than transferring large sums in one go. Some families choose to make modest “living inheritances” to help with specific goals—such as education or a home deposit—while observing how recipients manage that support. These real‑world tests can be more revealing than any questionnaire and allow for course corrections.
Formal education also matters. If your children are not comfortable with fundamental concepts like compounding, diversification and risk, targeted learning can make a big difference. This could involve directing them to reputable resources such as Moneysmart, encouraging workplace superannuation and budgeting programs, or arranging sessions with your financial adviser that focus purely on building their understanding, not selling products. For some families, involving the next generation in annual meetings with accountants, lawyers and advisers—initially as observers, then as participants—helps demystify the structures that support the family’s wealth.
Clear structures and documents are another pillar of readiness. Australian planners writing on intergenerational transfer stress the importance of up‑to‑date wills, enduring powers of attorney, appropriate superannuation nominations and, where relevant, trusts with well‑defined roles. These tools do not guarantee good decisions by heirs, but they can prevent some of the most damaging disputes and provide guardrails for how and when capital can be used. Combined with open communication, they reduce the odds that children will first learn about the scale of their inheritance in a moment of grief and confusion.
How advisers can help families run and pass the stress test
Australian financial advisers are well placed to guide families through this process. The six questions from the inheritance stress test offer a practical framework for adviser– client discussions: reviewing each area honestly, identifying gaps, and turning those gaps into an action plan. Rather than simply modelling how much can be left tax‑effectively, advisers can help parents think through when to transfer wealth, how much control and flexibility to retain, and what support children may need to handle responsibility.
Advisers can also act as neutral facilitators in family meetings. Drawing on insights from Firstlinks pieces about avoiding inheritance fights, they can encourage parents to explain their intentions clearly, surface unspoken expectations and ensure key decision‑makers understand the rationale behind structures and bequests. This proactive approach can reduce the risk of surprise, resentment and conflict later, particularly in blended families or situations where inheritances are unequal for good reasons.
Finally, good advice focuses on building capability, not just transferring assets. That might mean recommending that adult children have their own advisers, guiding them through budgeting and investing basics, or helping them set personal goals so that an eventual inheritance becomes a tool for their own plans rather than an undefined pot of money. Success, in this context, is measured less by the headline amount left behind and more by whether the next generation can stand on their own feet: managing risk, making decisions aligned with shared values and using their inheritance to build a sustainable, purposeful life.
For Australian parents looking ahead to the great wealth transfer, running an honest inheritance stress test now is an act of care, not criticism. It gives time to teach, to practice and, where necessary, to set boundaries—so that when the money finally moves, it feels less like a burden dropped on unprepared shoulders and more like a legacy that your children are ready to honour.
References
• “Could your children pass the inheritance ‘stress test’?”, Firstlinks, 27 November 2025.
• “Why the $5.4 trillion wealth transfer is a generational tragedy”, Firstlinks, 11 March 2025.
• “Australia’s $5.4 Trillion Wealth Transfer”, Navigate Financial (and similar intergenerational transfer articles), 30 October 2025.
• ASIC Moneysmart, “New Moneysmart data reveals young women more stressed than young men about money”, Media Release 24‑023MR, 3 June 2024; “Young people and money” report.
• Financial Basics Foundation, “Financial Literacy of Young Australians”, March 2022, and related studies on youth financial capability.
• “How to avoid inheritance fights”, Firstlinks, 3 June 2025.
• Australian Philanthropic Services, “$5.4 trillion wealth transfer poses deep questions on legacy”, 28 October 2025.
