Strategies for building, preserving, and passing down generational wealth for future financial security

By Mercy Mwelu

For some families, assets passed down from one family generation to the next, is pivotal in determining long-term prosperity. Family businesses, real estate holdings, capital market securities are some of the investments favoured by wealthy families.

A stark wealth gap exists with studies indicating that in markets like the US for instance, the typical white family has eight times the wealth of the average black family and five times that of the typical Hispanic family.

This disparity influences consumer decisions and behaviors across the financial industry. Wealthier families are often less burdened by debt, find it easier to own homes, and have more capital to invest and grow their wealth further. Many families shy away from having conversations about what will happen to specific assets when a family member falls ill or passes away.

Raila: Kenyatta family wealth shouldn’t be taxed; it’s inherited

In Africa, and specifically Kenya, there is a significant opportunity to improve the financial prospects of low-income households and narrow these wealth disparities. This demands a paradigm shift from the family unit, extending to national policies and interventions.

Targeted and strategic policies that promote responsible accumulation and transfer of resources can facilitate low-income families to build a legacy of generational wealth that benefits their future generations.

A 2021 report by Teachers Insurance and Annuity Association of America (TIAA) found that while 61 per cent of people understand basic borrowing concepts like loans and repayment, many struggle with grasping risk and uncertainty which are key skills needed to handle tough economic times.

This gap in knowledge can make it harder for families to build and pass on wealth across generations. Many low-income households often have to start the journey of wealth creation from scratch, facing the same challenges their parents and grandparents did.

Everyday investment and saving opportunities, when exploited wisely, can add up to long-term wealth. This includes picking the right mix of assets for your investments, knowing the best ways to save, or learning how to start and run a business.

Pay gaps and financial literacy differences across racial groups further make it challenging for some families to pass on wealth. The challenge for many isn’t just about how to make money, it’s knowing how to keep and grow it. Without these skills, each generation ends up starting over instead of building on the successes of those before them.

Kenya has made remarkable progress in financial inclusion, but differences persist among various segments of the population. These disparities exclude low-income households from the financial system, with significant disparities in financial access and usage across different demographics.

Many families shy away from having conversations about what will happen to specific assets when a family member falls ill or passes away. The vast majority of High-Net-Worth Individuals share little to nothing about their wealth with their children and this opacity can lead to real problems. Without a clear understanding of financial matters, younger generations often find themselves overwhelmed when time comes to manage their inheritance.
Wealth management involves the strategic planning and execution of investment strategies to build and preserve wealth over time.

It encompasses various aspects such as investment management, tax planning, retirement planning, and estate planning. Without a solid understanding of financial concepts and strategies, individuals may find themselves struggling to achieve their long-term financial goals.

To create sustainable financial wellness, Jubilee Holdings’ campaign dubbed ‘There’s Living, and There’s Living Free,’ is encouraging people to think beyond just building generational wealth. The campaign calls for a better understanding of investment and insurance options to make smart choices that secure a stable and wholistic financial future.

With 87 years of experience, Jubilee Insurance aims to share its wealth of knowledge with current and prospective customers and the broader community, especially those facing financial challenges in the region and across Africa. By empowering individuals with financial wellness solutions and insights, Jubilee is helping them pave the way for long-term financial stability.

The writer is the Head of Business Development – High Net-Worth Individuals & Institutions at Jubilee Asset Management Limited.