11 Tips for Building and Preserving Generational Wealth
by: Michael Fisher
The concept of next generation education can be an elusive one. We often relate this to the process of preparing younger generations for the responsibilities that accompany wealth. While this may seem like a common endeavor, many families often fail to formally address this. As a result, the common factor often becomes a pattern of actions that can prove detrimental to family wealth. Worst yet, those actions may also negatively impact the health, reputation, motivation and general well-being of family members.
Perhaps the lack of attention given to education is due to the sheer number of elements involved in the education process. The components can be far reaching and an educated individual might need to comprehend many subjects, including concepts of stewardship, family values, entrepreneurship, taxation, investments and many more. No wonder this can be easy to neglect.
While there is no formula to guarantee success, there are a number of practical tips that can aid families in the process of next generation education. This paper will share these in the hope that they can be applied with success within your own family. For those families that prioritize the importance of next generation education, the benefits can be significant. The greatest benefit is often perpetuation of the educational process among future generations.
Tips for Success
Make a commitment – The readers of this paper will likely relate to the concept of lifetime learning. Next generation education is no different in that it generally transmits from one generation to the next in slow and steady increments over time. When families view education as a process, as opposed to an event, the results can be dramatic. A long-term commitment to continuous education creates an environment where younger generations are continuously exposed to the learning process. In many cases, those individuals absorb information without intending to.
Create a plan – A long term commitment should be coupled with an intentional plan for educational opportunities or events. Remember that learning can take place in almost any setting so plan for those opportunities in advance.
Seek input and consensus from the participants – Don’t forget the importance of planning as a family. Each generation may have different ideas about how to approach education. Sharing ideas may help avoid conflicts and increase participation among all generations.
Start early – Our experience shows that starting sooner, rather than later, is most effective. When family members are exposed to this process at a young age it becomes part of their “DNA.” Younger participants may not always be ready to absorb or comprehend the information that they are exposed to but the chance to participate in the process will leave them prepared for the time when they are mature enough to do so.
Disclose financial information as appropriate – We believe that being open and forthright with financial information is a key part of this process and we encourage families to talk openly about financial facts and figures. Certain financial information will always be too sensitive or inappropriate to share, however, a goal of sharing information is generally preferable to concealing information.
Appeal to the talents and interests of family members – Remember that each family member is unique and that each of us learn in different ways. Many families address this through their charitable giving by allowing individual family members to direct gifts along the lines of their personal interests. The most important part of this is to find ways to engage each family member at a level of personal significance.
Look for non-family member mentors – The importance of individuals from outside a family that can provide a similar set of experiences or perspective should not be forgotten. If such individuals earn the respect of family members they can become a key part of the learning experience.
Admit your own mistakes and lead by example – While Thomas Edison was working to perfect the nickel-iron battery he was quoted as saying “I have not failed. I’ve just found 10,000 ways that won’t work.” Families too can encounter things that don’t work; business ventures, relationships, educational pursuits, etc. Those that are able to openly discuss failures and the lessons learned from them are always in a better position to avoid repeating unpleasant events or recreating unpleasant circumstances.
Document it – Good recordkeeping (in whatever form) is important for the obvious reasons of tracking family history and values. A less obvious reason is the opportunity that it may provide to engage younger generations in the process. New electronic mediums that document family trees, genealogy, reunions and the like are becoming commonplace. Don’t miss the opportunity to let younger, tech savvy generations take the lead here.
Engage experts – Some families choose to enlist the help of professionals for planning, content and execution of an education strategy. Also, a growing body of reference books, whitepapers and online content is available for those that are in need of a little extra help. If the “do it yourself” route is not appealing, help should not be far away.
Measure results – The goal should be to evaluate and review progress along the way. This does not suggest a formal grading scale, rather it implies a need for an open dialogue among the generations. A simple conversation might provide enough information to answer the question of “how are we doing?”
What to Expect Next
The list above is intended to provide a framework for families that are contemplating how best to prepare younger generations for responsible stewardship of their family legacy, values and assets. Wisdom gained from working with families in similar circumstances tells us that education is almost always the key to success.