“One day when I’m big!” How many times have we uttered those words as children when dreaming about our future? Then, quite suddenly, we find ourselves “adulting.” We begin reflecting on the lessons we have learned and considering the legacy we will leave for the next generation.
A well-planned legacy is one of the most meaningful gifts you can leave to your heirs. It is an intentional act to shape the future and ensure that the values, resources and wisdom cultivated throughout a lifetime continue to benefit generations to come.
Legacy planning is not limited to financial matters. It is a holistic process that weaves together family, tradition and personal principles.
Estate planning and legacy planning
When it comes to the financial aspect, we frequently use phrases such as “leaving a legacy”, “intergenerational wealth transfer” and “succession planning”. These terms refer to the transfer of assets to beneficiaries. This transfer can take place in various ways and at different times. It can happen while you are alive and even after you have passed away. What matters most is that there is a plan in place to do so, namely your estate plan.
Legacy planning delves a level deeper than estate planning. Understanding the shift from estate to legacy planning helps families align assets with values, ensuring that financial resources reflect personal principles.
Estate planning refers to growing and protecting your assets over your lifetime. It also encompasses how those assets are managed and transferred after you pass away. This includes ensuring that there is enough liquidity in your estate to settle debts such as mortgage loans. It also involves covering estate expenses like executor’s fees and estate duty.
Estate planning further entails providing for the maintenance needs of your surviving partner, spouse or children. It also addresses the transfer of wealth from one generation to the next. Without a proper estate plan, there is no guarantee that your wishes will be carried out or fulfilled.
Your estate plan should not be static. As your circumstances change and your assets grow, your needs and priorities will also shift. It is therefore imperative that your estate plan caters for changing needs and goals.
You should review it regularly, not only with your financial adviser but also with the next generation who will inherit your wealth. This ensures that your plan aligns with their future goals as well as your values and priorities. Legacy planning plays a crucial role in making this possible.
Legacy planning again goes deeper than estate planning. While estate planning focuses on valuables, legacy planning focuses on values. More than simply the transfer of money and property, legacy planning is about transferring wisdom and priorities. It offers guidance and support to those who follow in our footsteps. This is important in every family, but it is perhaps more significant in family businesses such as farming enterprises and philanthropic endeavours.
Understanding the journey from estate to legacy planning ensures that wealth is managed with purpose.
Financial education as children grow
The most valuable legacy we can leave future generations is financial education. This equips them with the skills needed to build a foundation for responsible money management. Below are guidelines for conversations with different age groups.
Pre-schoolers
- Identifying needs versus wants – explain the difference between things children need (for example, food and shelter) and things they want (such as toys or treats).
- Saving and spending – use a piggy bank to demonstrate the concept of saving money for a future purchase, like a toy or a trip.
Young children and pre-teens
- Setting savings goals – help children set simple savings goals, such as saving for a birthday gift or a special outing.
- Delayed gratification – explain the concept of waiting for a reward after saving or completing a task.
Teenagers
- Budgeting and financial planning – introduce more complex budgeting tools and help teens develop a financial plan for their future.
- Saving for the future – discuss the importance of saving for tertiary education, a car or other long-term goals.
- Understanding debt – explain the basics of interest, credit cards and the consequences of borrowing money.
- Basic investing – introduce the concept of investing and the power of compound interest.
Young adults
- Financial responsibility – emphasise the importance of managing debt, saving for retirement and making informed financial decisions.
- Earning money – explain that money is earned and that financial decisions are crucial to building a secure future.
- Budgeting and money management – demonstrate how to budget, save and invest in a way that supports financial goals.
Leaving a legacy
Leaving a legacy is about making choices today that will help others tomorrow. The sooner we impart valuable financial lessons to future generations, the better.
It is never too late to model and adopt healthy financial habits. Your actions now can echo far into the future, shaping lives and inspiring hope for years ahead. By consciously moving from estate to legacy planning, you ensure that your wealth and values leave a lasting impact.
Mariska Redelinghuys | Legal Specialist | Advice | PSG Wealth | mail me |
