LISTEN: Generational wealth explained – What it is and how to create it

Generational wealth is one of those financial terms that consumers prefer not to think about because they do not know what it means.

With so much financial pressure to navigate, consumers would prefer not to even hear that it has something to do with saving.

According to the definition of generational wealth, it is assets – such as land, business, education and housing, passed down from one generation to the next, either as an inheritance or while you are still alive.

July was National Savings Month, but was it even worth commemorating?

Consumers are not even vaguely able to save as it is and with the impact of consumer price inflation reaching a 13-year high of 7.4% and the fact that we have just come off the back of two tough years, the future for savings and creating generational wealth looks grim.

The 1Life Generational Wealth survey shows that 77% of South African consumers do not have generational wealth, with 61% who do not know or only have a vague idea of how to create it. However, 84% of consumers are expected to create it while it becomes more difficult to find work.

Almost half of the consumers (47.9%) had to dip into their savings to cover their monthly living expenses, with 37% indicating that they have no savings to even dip into.

ALSO READ: Proper budgeting can save you from financial ruin – here’s how

“The good news is that 91% of respondents believe that the creation of generational wealth is important,” says Carol Mazaka, consumer director at 1Life.

“As a country, we have a fundamental responsibility to support this and we also need to create a new generation of consumers who are focused on doing just that.

“Forget Gen X, Gen Y, Gen Z and think Gen W who will be empowered, awakened individuals where building generational wealth starts with me and starts today!”

The survey showed that 69% of respondents are optimistic about creating a sound financial future and many of them have – or are planning to – build general wealth.

Meanwhile, 41% have a life policy in place and 25% are planning to buy property.

Generational wealth does not only mean passing on land and businesses, but also other activities, such as investing in the stock market, investing in a child’s education, taking out life insurance and improving your financial literacy.

Mazaka says the biggest barrier for people to create generational wealth is that they cannot afford it.

She says many consumers have started a side hustle or a second job to earn more money and that is just a reality we have to live with.

She also advises consumers to stick to a budget and join a savings group such as a stokvel.

“I am not talking about large amounts. If you can save R100 per month, that is already great. We must break the cycle of not saving and make better decisions about our money.

“We have to get financially literate earlier and create a culture of wealth.”

She says consumers must talk about their finances in an open conversation.

“It is not a dinner topic, but you have to discuss what the family has available and what your goals are because this is where to start.”

Mazaka also encourages consumers to get rid of debt with high interest as quickly as possible to save on interest that could be used to create generational wealth.

ALSO READ: This is how to stretch your rands during Savings Month

Tips for creating generational wealth

Hayley Perry, facilitator of 1Life’s Truth About Money initiative, has these tips for consumers to create generational wealth:

• Pay yourself first by putting an amount aside for saving. Remember, saving means you make a profit.
• Change the mindset in your family from spending to preparing for a financial future.
• We make ourselves poorer. We need financial values about what is important.
• Plan to go shop and stick to your plan.
• Budget and make those difficult decisions while also growing your financial skills.
• Focus on what you can control: spending habits you can cut.
• Be careful not to scare your children when talking about the dire financial times we live in.

Talking to your children about money

Perry says you can explain your family budget to your children by using a pizza as an example of your money for the month.

Various slices are for various expenses and you must decide together how the remaining slices are spent.

Everybody can then give their input and learn that you cannot buy something because you are saving it for something else.

“We have choices, but we have to make them,” she says.

ALSO READ: How to get rid of your debt

Truth About Money financial education course

This course teaches consumers core money management skills to help them better navigate their finances and ensure they can alleviate debt or avoid it and improve their financial well-being by building wealth.

The course is free and comprises an 8-hour digital financial education short course.

Consumers can complete the course at their own pace and access it with their own laptops or go into any Boston City Campus & Business college across the country.

The course offers consumers lifelong access to online financial tools, additional information and support once the course is complete.