Creating Wealth for Your Family
As someone who is saving for the future, it could be worth asking if the next generation will be worse off, in the same position, or better off. What could you do today that could change the trajectory of your wealth and your family’s financial future?
Have you ever heard stories about children who inherited wealth from their parents only to squander it because they were used to the comfort of wealth but never took ownership of its growth? Studies in the US have shown that educated children are more likely to take care of inherited wealth than those who have not had the same educational opportunities. Education, therefore, represents a chance to preserve wealth.
Sterling Professor Emeritus of Law and Legal History at Yale, John H. Langbein, expands on this concept as follows:
“In the past, wealth transmission from parents to children tended to centre upon major items of patrimony such as the family farm or the family firm, today for the broad middle class, wealth transmission centres on a radically different kind of asset: the investment in skills.”
In South Africa, over the past two decades, we have witnessed the emergence of a middle class. To what extent will this middle class build wealth; and what legacy will they leave their children? Langbein argues that intergenerational wealth transfer can happen when parents are still alive, if they
invest to provide for their own retirement and also pay for their children’s education, effectively investing in these young people’s human capital.