Ignorance: Does this inheritance mean I'm rich?
Younger inheritors are especially susceptible to lack of understanding about how much money is a lot, versus how much is enough to live modestly, says Jason Flurry, president of Legacy Partners Financial Group in Woodstock, Ga. "They don't have a concept of how far the money can go," he adds, often leading to expensive purchases such as boats or homes that require ongoing maintenance and tax payments that can erode an inheritance fast.
The solution is preparation. "I think it's really important, in an age-appropriate way, to prepare children for the possibility of inheritance," says Madeline Levine, psychologist in Marin County in California and author of "The Price of Privilege" and "Teach Your Children Well."
"They don't have to know the exact amount, but most kids know if they come from wealth," she says. "The awareness needs to start at a young age -- 8, 9, 10 -- somewhere in there."