Henri Le Grange | Certified Financial Planner® | Old Mutual Personal Finance | mail me |
Most parents spend decades building generational wealth, but few spend the time preparing the next generation to manage it. That is often where things fall apart. We are very good at transferring assets, but we are not good at transferring judgment.
Research popularised by Roy Williams and Vic Preisser estimates that 70% of wealthy families lose their wealth by the second generation. Around 90% lose it by the third generation. The explanation often points to entitlement, poor discipline, or bad decision-making.
Building generational wealth requires more than assets
To build generational wealth, parents typically focus on portfolios, property and estate structures. However, when the time comes, their children often inherit assets without context. They do not know why decisions were made, which risks their parents avoided or how the wealth was intended to function.
At the heart of generational wealth is not money but understanding. If that understanding is missing, the transfer is incomplete. If your children do not understand your thinking, then you have not built the necessary bridge for a complete transfer. Instead, you have built a wall with money on the other side.
This gap between assets and wisdom is where building generational wealth begins to unravel. The solution, however, is not complex financial structuring or more sophisticated products. It is far simpler and far more demanding. It requires consistent, intentional conversation over time.
Conversations create capable heirs
That process begins much earlier than most parents realise. It does not require overwhelming children with technical financial details. However, it does require openness. Every day, moments matter. Explaining the difference between needs and wants, or why certain financial decisions are made, starts laying the foundation.
As children grow older, that exposure should deepen. By early adulthood, they should understand how taxes work in principle. Later, they should participate in financial planning discussions. They should not attend as passive observers, but as future decision-makers.
Every potential heir should understand a few foundational principles. These include how money works in everyday life, including income, expenses, debt and the difference between needs and wants. They should also understand how wealth compounds over time and why discipline preserves it.
Equally important is an understanding of risk. This includes diversification, insurance, and recognising opportunities that seem too good to be true. Future heirs should also understand how estates function. They need to know whom to contact, where important documents are stored, and what responsibilities arise when someone passes away. None of this requires complicated structures or expensive advice. It simply requires exposure and engagement.
Trusted relationships matter
Wealth building never happens in isolation. It depends on trusted relationships with financial planners, accountants and attorneys. However, many families fail to introduce the next generation to these advisers early enough. As a result, the first interaction often happens during a period of emotional strain and urgency. The first time your children meet your financial adviser should not be at a funeral.
In the South African context, this challenge is particularly significant. Many families are effective at building generational wealth, but they remain reluctant to speak openly about it. Money remains a private, or even uncomfortable, subject.
By shielding children from these conversations, parents unintentionally leave them unprepared. As a result, heirs are expected to manage complex financial structures at precisely the moment they are least equipped to do so.
The real legacy is judgment
Ultimately, generational wealth is not secured through documents alone. A will or trust may transfer assets. However, neither can transfer judgment. The real bridge is built through conversations.
Those conversations must be repeated, intentional and evolve over time until the next generation can think about money with the same clarity and discipline. That process does not begin in a boardroom or an attorney’s office. Instead, it begins quietly and consistently at the kitchen table.
