'Helping your children build their wealth over time': Financial planner shares top tips

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"It can take three or four generations to build wealth, but less than half a generation to wipe it all out!" (Getty Images)
"It can take three or four generations to build wealth, but less than half a generation to wipe it all out!" (Getty Images)

From the rising cost of living, the impact of the pandemic, which caused many businesses to close and youth unemployment, several factors contribute to many young adults moving back home.

Although current statistics for South Africa are not readily available, in 2018, Statistics SA reported that around 32.2% of households had more than one generation living under one roof.

In that same year, one South African financial services provider said that around 42% of 18 to 34-year-olds were still living at home, which is expected to have climbed since the onset of the pandemic.

Read: 'When we woke up, there was smoke': $10 000 lost in another money mishap

The knock-on economic effect 

And while money is in short supply, expenses continue to rise. 

Financial Planner at Consult by Momentum Warren Wilkinson shares that students spend "around R100K a year for meals, clothing and other essential expenses."

"The cost of tuition alone for an average graduate degree can amount to around R350K over 4 years. This doesn't take entertainment into account, which adds up."

He says it is not surprising that many parents cannot afford outside-the-family home accommodation for their kids.

The knock-on economic effect on caregivers is that "parents or caregivers may have less money to save towards their retirement in their later years, which could compromise their future lifestyle."

Due to the pandemic, many entrepreneurs are still clawing their way back from the economic effects of Covid-19 and unforeseen disasters such as the KZN floods - which have a dire impact on the cost of living with food and petrol prices hiking up.

Wilkinson reckons that we will be seeing more interest rate hikes this year as the cost of living rises over the next six months.

Still, he advises that parents whose children have finally flown the nest should prioritise increasing their retirement contributions to catch up on their savings, helping ensure a comfortable retirement.

"If your pension provision is not secure, ensure that you have sufficient severe illness cover in place and cover for frail care facilities - we have seen an increase in dementia-related illnesses and disabilities," added Wilkinson.

Must read: 'Actions have consequences': Here are 10 top tips to teach children about money

Generational wealth

Every parent wants to give their children the best possible start in life. According to Wilkinson, generational wealth planning helps give your child a solid foundation for adult life while safeguarding your lifestyle later.

"It can take three or four generations to build wealth, but less than half a generation to wipe it all out!" he points out.

"Set up a family trust structure with proper stewardship – this will make your growth assets available to the generations that follow you while helping your children build their wealth over time," suggests Wilkinson.

He says that a family trust holds the next generation in mind. 

'Needs vs wants' 

Wilkinson states, "the ongoing discipline around effective estate planning and budgeting discussions that involve the whole family is paramount."

He says these conversations can be more layered and complex, as they might involve family dynamics where divorce or death occurred.

Parents have remarried with multiple children across various life phases, for example.

"Prioritise the mitigation of estate and income tax-related costs and taxes, along with planning for a smooth and cost-effective transition of assets to heirs upon death," he suggested.

"You should also factor in your family budget and manage realistic lifestyle choices around needs vs wants," added Wilkinson.

Wilkinson also recommend having a will in place. 

This might seem obvious but the financial planner says they still see more than 75% of estates reported at the Master's Office belonging to people who do not have a valid and executable last will.

Wilkinson advises that when building generational wealth, you must visit a qualified financial adviser well-versed in wealth management to guide you and craft a plan tailored to your unique needs and lifestyle.


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