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Don’t Leave Your Wealth to Chance

30 July 2019

Here’s the reality about wealth – you could be making it, maintaining it or destroying it. If you could do something to increase your opportunities to build wealth for yourself and your loved ones, would you?

July marks Savings Month; and how fitting it is that we also celebrate Mandela Day during this period, in remembrance of the work done by President Nelson Mandela. One issue that Mandela emphasised, as a visionary leader, was his view that education is critical for success, progress and effecting positive change.

Nelson Mandela once said, “It is through education that the daughter of a peasant can become a doctor, that the son of a mineworker can become the head of the mine, that a child of farmworkers can become the president of a great nation. It is what we make out of what we have, not what we are given, that separates one person from another.”

The former president believed that education could positively impact the progress of a family and, by implication, their earnings in the next generation – presenting a powerful opportunity to create wealth.

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.

Langbein’s view of inheritance could be quite relevant for most South Africans. In other words, parents can enable a future where children will be better placed to access the opportunities required to generate wealth, without the need to contribute financially to their parents’ retirement.

In light of this argument, not leaving your (family) wealth to chance would require proper planning for funding children’s access to education, as well as funding your own retirement. This approach gives your family an opportunity to create and preserve intergenerational wealth.

Fortunately, this also presents benefits for South Africa’s economy. Lutz Wolfgang, Founding Director of the Wittgenstein Centre for Demography and Global Human Capital, writes about how Japan, China, Singapore and South Korea “built their stunning success stories primarily on improvements in human capital and without significant raw materials or international assistance.” He explains, “Economic growth followed the education expansion.”

Likewise, there’s an opportunity for us South Africans to build wealth for our country as we invest in our children’s education.

At Sanlam, we believe in education and the future it can enable for you, your family and South Africa’s development. With this in mind we’ve developed Sanlam Goal Manager to help our clients to successfully provide for education opportunities and build wealth.

Sanlam Education Planning

A Sanlam financial planner or accredited broker will use Sanlam Goal Manager to work out a savings plan that takes into account a client’s end goal (for example, a specific four-year degree in 10 years’ time) and payments that work for their circumstances.

Find out more about Sanlam Goal Manager and how to use our education planning tool.

This is an important conversation and we’ve partnered with some awesome South African parent influencers who’ll be sharing their real-life stories about saving for their children’s future.

We would love you to join the conversation by following them on Instagram and sharing your story for a chance to win big.

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