Your children might inherit your wealth, but will they know what to do with it?

Preparing your children for wealth starts long before an actual inheritance – you need to prepare them to manage it with responsibility and perspective, says Shaun Meintjes, Financial Adviser and Franchise Principal at Consult by Momentum

As financial advisers, we spend a great deal of time helping people build and preserve wealth. I’ve worked with countless clients who have spent decades growing businesses from scratch and nurturing investment portfolios. They are driven and hard-working, and eager to grow and safeguard their wealth. But while they are used to managing their money, they often don’t equip their children to do the same when the time comes.

It’s easy to understand why – no one likes thinking about what will happen when they’re no longer around. But leaving your kids a lot of money without preparing them for it can set them up for failure. You cannot assume the next generation will simply know what to do with wealth they’ve never had to build or think about. They need guidance and perspective, and that starts with honest conversations.

Money shouldn’t be a family secret

The single biggest mistake you can make when discussing wealth and inheritance is not talking about it at all. I’ve sat across from adult children who had no idea their family had significant wealth until a parent passed away, and they were completely overwhelmed. That’s not protection, that’s a failure. I’ve also seen the ones who only ever heard “money doesn’t grow on trees,” with their parents preaching frugality while living lavishly. This creates confusion and resentment. And then there are the kids who see wealth as a reward and not a responsibility. When all you tell your kids is that one day they will inherit everything, they can develop an entitlement mindset instead of a stewardship mindset. All three of these scenarios increase the risk of poor financial decisions because the children have never been taught how to think about – and look after – wealth.

Preparing children to manage wealth goes far beyond teaching them how money works. You need to instil in them the value of delayed gratification, because that is what underpins sound financial decisions. You can teach a child about a balance sheet, but if they can’t distinguish between what they want now and what they need long-term, they’ll be blowing through their inheritance faster than you can say yacht holiday in the Med.

You also need to teach them how to tolerate discomfort and uncertainty. Markets fall. Businesses fail. Economic conditions can change with every news bulletin. Children who have been shielded from every difficult experience tend to panic when things go wrong financially, so you need to help your kids develop resilience and patience. That goes hand in hand with accountability. Wealthy families often insulate their children from consequences, but if poor financial decisions are just quietly erased with Mom’s bank card, they learn nothing. There must be proportionate exposure to real outcomes, for instance, giving them a fixed allowance and not topping it up when they overspend.

The final value I would encourage parents to instil – and demonstrate – is empathy. Children need to understand that wealth carries a social responsibility, especially in South Africa, where the gap between the wealthy and those who have nothing is massive. Children who grow up with no awareness of that context often make poor decisions about how they deploy capital and can easily lose sight of the broader communities their businesses and investments exist within.

Getting your children ready for inheritance

These values – patience, accountability and empathy – become part of family life through regular conversations and habits. Start with your spouse. You need to be aligned by agreeing on the values you want to transmit, when you want to talk to your children, and what role you expect them to play in managing the family’s financial affairs.

From there, bring your children into the conversation in an age-appropriate way. A 10-year-old doesn’t need to know how many zeros the family trust has, but they should understand how money works, what things cost and what it means to earn it. As they get older, introduce them to the family’s financial structures, life cover and estate plans, and give them a budget they must manage themselves, such as a clothing allowance or petrol money. Don’t present it as a windfall – present it as a responsibility they need to take seriously.

You should also rely on your financial adviser for guidance on what your child needs to understand about your wealth before you’re gone. A good adviser will sit with the next generation separately, walk them through the basics of the estate plan and any trusts so they understand their roles and responsibilities. They will build a relationship with your children, so they don’t have to start from zero with a stranger when you’re gone. Your children should also know who your accountants and attorneys are, so they understand that wealth management involves professional relationships. You can also consider creating a “family constitution” or “letter of wishes”. It doesn’t have to be a legal document – think of it as a written explanation of why your family built its wealth, what you hope it will achieve and the responsibilities that come with it. Some families do this as a collaborative exercise with their children, which in itself becomes an incredibly valuable conversation.

Having these conversations early and giving your family years to prepare will ensure a smooth wealth transfer – and that money isn’t the only gift you leave your children.