The phrase 'generational wealth' is becoming a buzzword in charismatic churches as people, quite naturally, want to build wealth that can help their offspring gain a head start in life.
Generational wealth is any property that is passed down from one generation to the next. This includes land, cash, businesses, shares and various other types of financial assets. Traditional African societies regarded land as generational wealth, though it was owned by the community, not by individuals.
For those who have already accumulated enough wealth to pass it on to the next generation, certain cultural practices can either assist or hinder the process. Some cultures are communal; adults of various generations live together in the same house. Younger members of the family do not have to worry about paying rent or buying a car because those assets are already available to them.
Some cultures are not communal. Each person is expected to set out on his or her own and build wealth. While independence can motivate a young adult to work hard, it makes it harder for each generation to accumulate wealth.
"I told my children it would be a waste of money for each of them to build their own homes when I already have a house for all of us," Peter Mwamba, a father of six and grandfather of three, says. "I do not see the need for my children to start from scratch when I already have property."
Mwamba believes his children should use the property he has acquired in his lifetime to lift themselves to higher levels of prosperity instead of having to redo what he started 40 years ago. "The culture of each generation starting from scratch has to change," Mwamba advises.
Mwamba may have a valid point. Ethnic groups that live communally seem to be doing much better at accumulating generational wealth. Cultures where several generations of adults live in one compound also seem better at retaining wealth. Effective communication with children is among the strategies that can foster positive wealth management attitudes from an early age.
"A family which understands its unique generational maze can open a door of communication through which children's (inheritors') dreams may be discovered and subsequently fostered to regenerate the family wealth," Michael Pompian, an expert on behavioural finance, says. In his book titled Advising Ultra-Affluent Clients and Family Offices, Pompian suggests open communication will help young people understand the meaning of wealth.
"Listening to our children (just as we should listen to our clients) validates them and makes them feel important," Michael Pompian wrote. He recommends regular family meetings as a forum for encouraging the next generation to participate in all aspects of the family's life, something that is key to wealth management success. He disapproves of lavishing expensive gifts on children as it teaches them wrong attitudes about money.
The best way to manage generational wealth is by teaching children how to use it wisely. Be a good example and you could very well be pointing the next generation to a brighter future thanks to the foundation you built.