“The father buys, the son builds, the grandchild sells and his son begs.” says a Scottish Proverb.
The Chinese have a saying, “Fu bu guo san dai”, which means wealth never survives three generations.
Traditional wisdom holds good for modern days as well. I come across data, articles and stories in this regard.
It is very difficult to be rich. Only 1% can be in top 1%. According to Credit Suisse if you have more than Rs.5 crores, you are among top 1% of the world population. A million dollars (Rs.6.5 crores) puts you in top 0.7%.
We have to get rich only once as long as we don’t do anything foolish. As both investor and advisor, our focus is always on avoiding permanent loss of capital and at the same time to grow wealth at a reasonable rate.
Ben Carlson in a recent article points out that about 70% of people who receive a financial windfall lose it within a few years. Also nearly 80% of NFL players are broke or bankrupt after being out of the league for two years. Sixty percent of NBA players are broke after being out for 5 years.
If you are interested like me in studying about wealth, there is so much of information and data available.
The above example shows how difficult it is to stay rich in our generation itself. I’ve also seen people lose their wealth by taking unwanted risks.
I came across an article in Time magazine. It says that 70% of wealthy families lose their wealth by the second generation, and a stunning 90% by the third generation.
Out of the people who get rich, not all stay rich. Even amongst those who are able to stay rich, 70% lose it in second generation and by third generation it becomes 90%.
One way to minimise such happening is to teach children and grand children the value of money and the art of money management. There is no such thing as easy money and by design only few are endowed with good wealth. If we don’t value something we have, it would start slipping away. Not to talk us up, but having a financial advisor who can be a mentor and coach would definitely help.
This should also make us ponder over giving, as part of wealth management. Not all focus on giving as much as saving and spending. We all create wealth because of the opportunities provided by the society and we need to give at least something back. In our case, our family has decided to allocate 10% of our wealth for charity when I turn 60. There is no hard and fast rule for giving. But we thought 10% is the least we should do.
Like all things in life, wealth is also ephemeral. By teaching next generation, you can at least prolong it. By giving, you can make positive impact in the life of less privileged.
Some points to ponder for the weekend.