We have a moment in time to seize the significant wealth transfer while benefiting society and creating the kind of people we want our kids to be.
An Australian giving pledge, whereby influential wealthy families publicly commit to giving away a minimum of 20 per cent of their wealth in their lifetime or upon death, would be a good start.
Read the following article by Peter Winneke, Philanthropy consultant, as published in The Financial Review Nov 29, 2024
It’s my belief that when it comes to the question of how much wealth is appropriate to give children, a rule of thumb is enough to buy a modest property.
By modest I mean a property that, if sold, would not generate enough money to allow them to opt out of building a career and earning income.
Kids need to learn to work, to fall down, get up, dust themselves off and build careers.
Give them the property when they need it – when they are building families and careers – and tell them that is all they are receiving. Then they won’t be waiting for you to die.
I have worked with families who agree with this. But others hesitate. “But I had nothing when I grew up, and I want my kids to have everything,” they say.
I can tell the “nothing” is what built their resilience.
A number of recent reports have suggested that $5 trillion will be passed to the next generation in Australia over the next two decades.
We have a moment in time to seize the significant wealth transfer while benefiting society and creating the kind of people we want our kids to be.
With this transfer, families are starting to give more consideration to how much is enough – and their life legacy.
I recommend matriarchs and patriarchs do the calculations to determine how much wealth they need to maintain their lifestyles. People are often surprised at the sum of the “surplus”.
Once they understand the surplus, the “letting go” (the giving) becomes easier.
A natural next step is to ponder how much to leave the kids.
Kids need to learn to work, to fall down, get up, dust themselves off and build careers. This is how we build resilience and self-esteem. As Warren Buffett says, “Leave enough to your kids to do anything in life, but not enough to do nothing.” As a dad, that makes sense to me.
Of course there are many wealth creators who simply wish to continue to accumulate wealth. For them, life legacy is often equated to the level of wealth created.
But these families have not experienced the incredible satisfaction of giving.
A family foundation can be an extraordinary educational tool for the next generation.
It is a microcosm of a business; it just happens to be in the business of grant making and investing for social good.
A foundation, regardless of size, has finite resources. So the kids are learning about investment strategies.
Endless teachable moments
The family unit then needs to determine the mission of the foundation, the giving strategy, the implementation strategy and how to measure impact.
Family members will be meeting inspiring community leaders who are having a crack at important issues in our community. There are endless teachable moments.
The satisfaction of working with your family assisting the community is incredibly rewarding. From my experience this provides a strong base for kids to lead a more rounded, satisfying and productive life.
Best practice is to pick two issues that a family is passionate about, determine which organisation or charity is having the greatest impact in that space and how they measure impact, and then support them with long-term unrestricted funding. This rarely occurs.
There is considerable evidence from Australian Tax Office data and other places that we are yet to build a strong culture of giving in this country, particularly among wealthy families. This does not surprise me, as much of our wealth has only been created in recent decades
I’m optimistic that our giving culture will improve in the next decade, as families give more thought to how much is enough, and how much do the kids need.
Telling better stories
With myriad community issues to face, we will seek more purpose and ask ourselves, “Have I done my best work yet? What is my life legacy? Should life be about creating wealth or life-long memories?”
We have the wealth and intelligence to solve all issues on the planet if we can be inspired to do so. Imagine if just 10 per cent of the $5 trillion to be passed to the next generation was gifted to charitable trusts – that’s $500 billion.
This could distribute $25 billion to the community every year. Now imagine the positive impact on our community, and further abroad, if this was done effectively.
Part of achieving this will come from telling better stories around the satisfaction of giving.
Material giving is abnormal, so when it occurs, families often keep their head low and don’t talk about it.
Peer influence is powerful. We need families to give material sums and then talk about it, in order that material giving becomes the norm.
An Australian giving pledge, whereby influential wealthy families publicly commit to giving away a minimum of 20 per cent of their wealth in their lifetime or upon death, would be a good start.
Read the full article here. (for subscribers only)
