The Importance Of Value Creation For Building Generational Wealth

Whenever we enter someone’s house for the first time, we always notice something. A friend of mine has a house that can be described as impeccably clean. Always.

I also know two people whose homes are unbelievably cluttered. Since I am a minimalist of sorts, I find it overwhelming. Which reminds me of someone’s house where the stench of the animals gagged me the moment I entered the apartment. It was terribly untidy (they had to pick up clothes, books and a few cats from the sofa to make place for the humans to sit). The barking of the dogs was irritating, and I felt it was an assault on my senses.

Once a friend visited her aunt’s old and massive home in Goa, which was dilapidated due to the high maintenance cost; and I remember her describing the home as “very obviously poor”.

Besides the obvious, as I have dispiritedly described, you can also instantly and intuitively pick up on the essence or the vibe of the home. I find this extremely intriguing.

The Danes have a term called “hygge”, which is the feeling you get when you walk into someone’s house. You invariably pick up on the essence or the aroma; it could be warmth, coldness, hostility, tension, comfort, contentment, toxicity, or even love.

Have you ever wondered what aroma your family exudes? Have you ever wondered what it is you would like your family to be known for?

That is a very crude form of what heritage is all about. It is the values, integrity, and reputation of your family.

Inheritance And Heritage

We tend to conflate the terms inheritance and heritage. That is a mistake.

In the financial world, inheritance refers to the ownership of assets that will be passed on to the next generation. It could be art, antiques, collectibles, financial assets, precious stones, jewellery, bullion, or real estate. All of this is a blessing, and no one should be berated for inheriting wealth. Some of it even carries a lot of sentimental value; pieces of jewellery or selective pieces of crockery passed down through generations.

A friend told me that her daughter who has immigrated to the US and has been living there for many decades informed her that the only thing she wants from her possessions is her Swarovski collection. That’s because it reflected her mother’s choices over many years, and it was very dear to her, besides being astoundingly beautiful and expensive.

Inheritance is tangible, and certainly not the only form of wealth that is passed on. Wealth is more than just monetary in value. Generational wealth transfer is so much larger; it encompasses tangible assets as well as intangible assets (heritage).

Think about these questions regarding your family. The answers will overlap, but they will bring about clarity:

• What are you all known for?

• What is the reputation that you all have?

• What would you like to be remembered for?

• What would you like your family to be associated with?

Families with a heritage stand out for numerous reasons. It could be the values imbibed, such as a business known for its integrity. Or, it could be a skill set or a mindset. Or it could even be a family that chooses not to flaunt its wealth.

There are some who are known for their dedication in preserving wildlife. Others are known for their role in education, or their passion for the environment. They don’t easily sport a sense of entitlement. They appreciate their privilege and are eager to empower those less privileged. They uplift, rather than dehumanise.

Value Creation

Scott Donnell is an entrepreneur, podcast host, and author known for his studies of multi-generational high networth families. His observations, which span over a 100 such families, are brilliant at best and thought-provoking at worst.

I share one line of thought from his repertoire of knowledge, which is on value creation. According to him, a rich heritage and creating value go hand-in-hand. They feed off each other.

If you focus on material value creation, you will be rewarded financially. If you create emotional value in your children, it will lead to healthy relationships, trustworthy friendships, and strong family bonds. Likewise, spiritual value is uplifting, because it leads to detachment and an ability to enjoy life in the present. Elsewhere, cultural value enables them to appreciate their beliefs as well as respect those of others.

True value creation is often ignored in the money creation journey. Value creation precedes money creation. Moreover, it lays a good foundation for managing wealth responsibly. Value creation is an essential part of heritage. Create value first, not money. Because money is a store of value.

Teach your children and grandchildren to be value creators, and they would be excellent stewards of relationships and money. This is a great asset to pass down and gives them an advantage in life.

Here’s what Scott does with his four children. He does not believe that his children be paid to do their bed, take the garbage out, wash dishes and run errands. That should be part of sharing and caring responsibilities in a family and creating a home where everyone is happy.

Instead, he encourages his children to think of ways to create value—either at home or in the community or in the school, and they will be rewarded.

He and his wife brainstorm with them to think of tasks that will make someone else’s life easier, or solve a problem. The children get monetarily rewarded if they mow someone’s lawn, run errands for a neighbour, have a recycling drive, listen to a podcast (or read a book) and tell the parents three things that they learnt. You get the gist.

He does this to teach them how to create value, how to appreciate the money earned, delayed gratification, and the skills needed to manage wealth responsibly.

Responsible Deployment

When it comes to inheritance and heritage, the issue is not just about earning and inheriting, but how well it is ultimately deployed. This is something most parents should pay special heed to. The next generation needs to be able to handle that wealth without squandering their heritage.

Money is a tool that makes you more of who you already are. If you are generous and kind, money amplifies those qualities. If not, it magnifies those flaws. This is why it is important not just to leave an inheritance for the next generation, but also a heritage.

Even if you can’t pass on an inheritance, do pass on a rich and meaningful heritage.

By Larissa Fernand, Behavioural Finance Expert