ESTHER MUKUMBO: Creating a financial legacy

We have just come out of September, and two things stood out for me during the month that are closely linked: Heritage Day and National Wills Week.

The word “heritage” refers to inherited traditions, monuments, objects and culture. Most important, it is the range of contemporary activities, meanings and behaviours that we draw from them. Heritage also, therefore, means preservation. When it comes to money matters, my thoughts always centre on what I can do now for my children. What traditions can I pass on to those who will outlive me? What money behaviours have we learnt from our parents that we can pass on to the next generation that will stand them in good stead?

On one level, when people think of legacies, they think of Bill Gates and Warren Buffett. Bringing it down to the nonbillionaires among us, what does leaving a legacy mean? For many, it’s securing their children’s tertiary education debt free, having a deposit for their first home or buying their first car. This essentially sets up the next generation so that they don’t start off on the back foot.

Here are some ways to create a virtuous legacy:

1. Set up a financial plan, one that guides your hopes and dreams, and implement it. Research has shown that people who have a financial plan are likely to be financially better off than those who do not. 
2. Pass on knowledge. What is the one aspect in terms of your finances that you would like to pass on to the next generation? For example, regarding financial literacy, ensure the next generation knows and understands how to budget, access credit, save and invest. 
3. Plan your estate. Do you have a valid will in place to ensure that your wishes are carried out in the event of your death? There is nothing worse than leaving loved ones who are financially dependent on you with no guidance of how you want your finances to be dealt with.
4. Have life insurance: most life insurance policies will include the funds needed to cover a funeral, some within the first 48 hours of death. Decent life cover will help take care of your children’s education and pay off the debt on your car and house.
5. Nominate the beneficiaries on your pension or provident fund and retirement annuities. These products are governed by the Pension Funds Act, and fall outside the ambit of an estate (which is covered by your will). This requires that you name the beneficiaries so that they are paid out upon your death.
6. Preserve your assets: consider setting up a trust that will then own your key assets, such as  the family home.

Sure, this all involves administration, but these are important and doable if your goal is to build a financial legacy that will be passed on from generation to generation.

* Mukumbo is a financial literacy enthusiast and investor