Many business owners believe that the key to preparing their children to inherit their wealth is to give them a strong academic education. They spend a lot of time and money on this idea, only to find that their children may not be interested in the family business or lack the skills needed to successfully run it.

Formal education is important, but getting the next generation ready to handle wealth goes beyond what a classroom can offer. It’s a lifelong process that starts in childhood and continues through various stages of life. This preparation includes building a mix of technical skills, soft skills, values, resilience, and the ability to make wise decisions. The mode of delivery is both formal and informal, including observation, correction, teaching and in some cases, repetitive action needed to drive home the most important lessons.

Preparation is critical because wealth comes with the responsibility of ensuring its proper stewardship. The complexities of wealth can quickly become overwhelming, transforming it from a privilege into a liability with potentially adverse consequences. Here are practical ways to prepare the next generation to properly steward wealth.

Sharing the Family Story:
The family story serves as a powerful tool for connecting the next generation to their roots and heritage. It is important for children to know how the family got to the point of success, the challenges experienced and how they were surmounted. By sharing stories of the family’s journey, successes, failures, and the values that underpin the family’s wealth, young successors gain a sense of identity, purpose, and a deeper understanding of their role in carrying forward the family legacy.

Teaching Core Values:
Family values play a crucial role in shaping the next generation’s mindset and behaviour towards wealth. By identifying and articulating core values such as integrity, responsibility, philanthropy, and hard work, families can create a moral compass that guides their successors’ decision-making process and ensures that wealth is managed in alignment with the family’s principles. It is important that these values are not just discussed, but are demonstrated as a part of day-to-day life and decision-making. This helps the next generation embrace them as practical realities, not merely theoretical concepts.

Building Essential Skills:
Beyond academic degrees, the next generation must have a strong understanding of wealth in its different forms. Financial literacy should be developed at an early age, including the basic principles of investments, financial management, risk and return to mention a few. It is also essential to equip the next generation with a diverse set of skills that will enable them to navigate the complexities of managing wealth. These skills include entrepreneurship, critical thinking, communication, negotiation, and leadership. Providing opportunities for education, mentorship, and hands-on experience will help develop these skills and cultivate a well-rounded approach to wealth management.

Cultivating Qualities for Success:
In addition to skills, cultivating qualities such as resilience, grit, adaptability, and a strong work ethic is vital for long-term success. These qualities empower successors to overcome challenges, persevere in the face of adversity, and seize opportunities. Encouraging a growth mindset that embraces learning, personal development, and continuous improvement will foster a mindset of success and resilience.

Incentivizing Good Behavior:
To promote responsible wealth management, it is important to create incentives that align with the family’s values and encourage positive behaviours. This can include recognising and rewarding accomplishments, providing opportunities for leadership and decision-making, and fostering a sense of ownership and responsibility. Incentives that promote long-term thinking and prudent financial management will help successors make sound choices for the preservation and growth of family wealth.

Discouraging Entitlement:
One common pitfall among wealthy families is the development of an entitlement mindset. To counteract this, it is essential to instil a strong work ethic, emphasizing the value of hard work and the importance of earning one’s success. By encouraging successors to pursue their own passions, aspirations, and careers, families can foster independence, self-reliance, and a sense of personal fulfilment that goes beyond monetary wealth.

Children who are well-prepared to manage family wealth exhibit a range of practical qualities. They possess a strong grasp of the family’s method of creating wealth and their role in preserving it. They are able to think long-term, prioritizing the growth and preservation of family wealth over short-lived indulgences. They also hold strong ethical values, guiding their decisions in financial matters and social responsibilities. In addition to being team players, they demonstrate leadership skills, effectively collaborating within the family and with advisors. What truly stands out is their knack for innovation and their enthusiasm for taking on new challenges, combining their education with real-life experiences, and building upon the achievements of their parents to ensure continued prosperity.

Preparing the next generation for wealth requires a holistic, deliberate approach that targets the development of children as balanced members of society who can flourish personally and function productively in society. It takes prioritisation, time and commitment on the part of the founders, but the returns are more than worth it.
Ojenike is a  Family Wealth Adviser at Meristem Family Office.