Think you are growing your money? Here is the true test of successful wealth creation – IOL
By Adriaan Pask
In wealth creation, as in life, true success lies in helping the next generation become independent. We all want to leave something behind for our children and grandchildren, but what if, more than just a lump sum, you can leave them with financial wisdom?
The problem with bestowing your beneficiaries with a lump-sum amount combined with no financial know-how is that they can find themselves right back where they started (or worse). Too often, a lack of financial education can cause money to be misspent or capital to be poorly allocated. Research conducted in 2015 by the Williams Group wealth consultancy stated that about 70% of family wealth is lost in the second generation, which increases to about 90% in the third generation. So, what can you do to protect your beneficiaries from having this happen?
Focus on building a healthy relationship with money
Just as with saving for your retirement, the best time to start speaking to your children or grandchildren about money is when they are young, and the next best time is right now. David Anderson, PhD, clinical psychologist at the Child Mind Institute, advised that you can start a child’s financial education from about eight or nine years old, when their maths skills are advanced enough to understand basic arithmetic. Be open and help them become comfortable with using money and wealth journeys as an everyday occurrence, instead of having to figure out how to build (and stick to) a budget when they get their first paycheque.
Discuss things like the difference between a long- and short-term financial goal and the aspects involved. For example, comparing a “rainy-day fund” to retirement – you’ll look at the ultimate size, the monthly contributions, the type of product needed, ease of access to the funds, duration, etc. A visual way to show little ones how savings can accumulate is to give them a glass jar for a piggy bank so they can see the money fill it up.
Always keep in mind when discussing finances that a healthy relationship with money can open a wealth of doors and lead to optimal wealth creation.
Limiting beliefs around money
Practice the art of setting financial goals
Again, there is no age limit to setting SMART (specific, measurable, attainable, realistic, time-bound) financial goals. The goal can be anything, from saving for a pair of sneakers to buying a house …….