Generational wealth is a component of financial planning that focuses on ensuring that future generations inherit stable, substantial financial resources. I do have a question, though: can you teach wealth creation? Don’t you suppose many business-people, scholars, financial planners and others would be extremely wealthy if all it took to become affluent was knowledge? They aren’t wealthy because it takes more than knowledge to be wealthy. It necessitates a great deal of smart work, discipline, sacrifice and a number of other deliberate actions.
Whilst it is true that those who inherit generational wealth may have a significant financial advantage over those who do not, various studies have shown that this advantage can easily be lost. Therefore, successful family wealth transition is not an accident, it happens when people are intentional about strategically empowering their families to sustain wealth. If you want to change your generation and have a life-long generational wealth transition, you must be deliberate, hardworking, strategic and ensure that your descendants are willing to work hard with the right vision, attitude and values.
Here are Three Common Misconceptions Regarding Generational Wealth:
1. Wealth is Transferred from One Generation to Another
According to a recent Money Magazine study, 70% of wealth transferred from one generation to the next is lost in the second generation and a staggering 90% by the third. Those who are able to pass wealth down to the second and possibly third generations are highly intentional and strategic, having put in place an adequate succession plan to ensure that their wealth is passed down to descendants who share their values.
“Looking at the numbers, 78% feel the next generation is not financially responsible enough to handle inheritance,” says Chris Heilmann, U.S. Trust’s chief fiduciary executive. In addition, 64% admit they have disclosed little to nothing about their wealth to their children. As a result, it is clear that wealth transfer between generations is a deliberate rather than accidental feat.
2. The Rich Begets the Rich
According to an exclusive report from Wealth-X, roughly 68% of the world’s wealthiest people are self-made, with the remaining 23% having a mix of inherited and self-created wealth. Only 9% of the world’s high-net-worth individuals were found to have inherited all of their fortune.
Apart from being famous billionaires, Oprah Winfrey (TV personality net worth $2.7 billion), Ralph Lauren (Fashion designer net worth $7.1 billion), Tyler Perry (Actor, Director, Producer and Screenwriter, net worth $1 billion), Mike Adenuga (Businessman, Founder of Globacom and Chairman of Conoil, net worth $6.3 billion) and Patrice Motsepe (Businessman, Founder and Chairman of African Rainbow Minerals, net worth $3.1 billion) started with little and have amassed enormous riches over the years.
These information attest to the fact that only a small percentage of the world’s wealthiest people, are wealthy because of their backgrounds. The vast majority of wealthy people around the world came from very humble beginnings, and guess what? Backgrounds humbler than yours.
3. Wealthy People Inherited their Company
There is also the belief that most people nowadays are wealthy because their fathers left them stable and successful companies or businesses. One of the most important lessons to learn – and one that I believe COVID19 has demonstrated to us – is that in order for any company or organization that has been turned over to you to be successful, continuous efforts must be made to rebuild, re-strategize, rebrand and rework it.
Some businesses that thrived in previous years have since become bankrupt. To stay relevant, any business or venture must keep up with the times and strive for continuous improvement.
More frequently than not, the myth of generational wealth being passed down from one generation to the next is not true. Several studies suggest that, passing on family fortune to generations beyond your grandchildren is nearly impossible. There are several pitfalls to avoid if you want your hard work to last till the third generation and beyond. In addition, smart investments, a good plan and educating future generations is critical to safeguarding your wealth. Imbibe your values into your upcoming generations to secure the future of your family and your fortune.
So, regardless of your background or story, you can deliberately work your way up through the success ladder.
Remember, You Have Only One Life to Live, MAKE IT COUNT!