Generational wealth is really a family matter. It starts with the relationships we have with each other, then the relationship we have with money.
It’s about taking the necessary, sometimes uncomfortable steps today, to give your loved ones a leg up in life. The 1Life Generational Wealth Survey found that 42% of South Africans learn money management from their parents. This highlights the very important role parents can play in influencing their children’s money values.
Normalise money conversations
Money is usually a tough topic to discuss because it usually comes up when it’s not enough in the middle of a problem to be solved. So the common discussion becomes how to get more to fix the issue at hand. However, it is important to regularly talk about it when everyone is calm – without the anxiety. Spouses should be able to discuss debt, savings, expenses such as medical contributions, insurance contributions, expenses related to extended family members, etc. Similarly, children should learn about managing money from a young age
Enough life insurance to leave behind
People often shy away from discussing topics around life insurance as it means they have to think about the eventuality of death, disability and illness – all difficult situations to come upon. However, when you think of it as a means to help your family cope with the loss of your income, it becomes a positive conversation to have.
In fact, 41% of respondents in the 1Life Generational Wealth survey rely on life cover to create generational wealth. So it is important to determine how much money your dependents would need in the event that you are no longer around. Can they cover current and future expenses, outstanding mortgage, children’s education or other large debt? Over and above this – will there be money left over for unexpected needs or to grow wealth by e.g. starting a business.
Pass down more than money
Money is great for what it can help your loved ones accomplish once you’re gone. But passing down the right money values will ensure the money you leave behind really looks after your family. It is estimated that 70% of wealthy families lose their wealth by the second generation and 90% lose it by the third. This shows that subsequent generations may not be equipped to manage the money they inherit.
Instill a mindset that can ensure the important things are prioritized when it comes to spending the money you leave behind. This could mean encouraging them to work with a financial adviser to manage the money they receive. Also, programmes such as 1Life’s Truth About Money provide the financial education necessary to learn how to get rid of debt, manage your spending and save. This will go a long way towards preserving generational wealth.
1Life Insurance Ltd is an authorised life insurer and financial services provider (FSP licence number 24769).
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