Honouring our heritage while empowering future generations with the gift of financial wisdom

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While we reflect on our past, it is also a time to think about the future, especially how we can build legacies that will empower future generations.

Thomas Berry, head of sales at PSG Wealth says, “One of the most enduring gifts we can all pass on is financial wisdom to allow future generations to unlock financial freedom. Instilling financial literacy in the next generation empowers them to build a secure and prosperous future.”

The value of cultural wealth

In many South African cultures, wealth is not just measured in monetary terms but also in the richness of relationships, community principles and knowledge passed down through generations. This cultural wealth is the foundation upon which financial wealth can be built. By preserving and celebrating our heritage, we reinforce the values of resilience, collaboration and long-term thinking.

Instilling a culture of saving

Instilling a culture of saving begins at home. Building wealth involves a combination of strategic financial planning, personal discipline and maintaining a long-term perspective.

Unlike chasing short-term gains or ‘quick’ returns, building wealth is a process that takes many years and requires consistent action. Part of planning for a successful financial future involves tax-efficient choices and for many investors, that starts with opening a tax-free savings account (TFSA).

Currently, investors can make contributions up to R36,000 per tax year, with a lifetime limit of R500,000. The unused portion of annual allowance, currently R36,000 will not roll over to the subsequent year. Any growth on the investment is tax exempt, meaning that in the long term, the accumulated value of a TFSA typically outstrips that of a taxed investment product (assuming it is invested in similar underlying funds) – often by a wide margin. This is particularly true of growth on tax-free investments over the longer term, i.e. for a period of seven years or more.

Many investors choose to use a TFSA as a way of saving for their children’s tertiary education; a longer time horizon, provides a reasonable amount of time to grow returns for this purpose, tax free.

It is also possible for parents to take out TFSAs in their children’s names. Bear in mind that the child will use his/her own annual or lifetime limits. Ultimately, given that these funds can cover the cost of further education or setting a young adult up for a successful start in life, many parents consider it a reinvestment into generational prosperity.

Remember that good habits compound overtime

The concept of compound growth in investments is a powerful force that allows investments to grow exponentially over time. Compound growth occurs when the returns generated from an investment are reinvested to generate additional earnings, leading to a compounding effect that accelerates the growth of the investment.

Over time, even small initial investments can grow significantly due to the compounding of returns. This phenomenon highlights the importance of starting to invest early and consistently adding to investments to maximise the benefits of compound growth. By harnessing the power of compound growth, investors can potentially achieve their financial goals more quickly and build substantial wealth over the long term.

Heritage Day is not only a celebration of our past but also a time to plan for the future.

Leaving a legacy is not always as easy as it sounds but by introducing financial education early in life and nurturing this knowledge as children grow, we can empower the next generation with the essential skills to make informed financial decisions.

This legacy of financial wisdom, rooted in cultural values and strengthened by practical experience, will ensure they are well prepared for life's challenges and opportunities.

Let’s use Heritage month as an opportunity to reflect on the legacies we are creating and to take steps towards financial empowerment that honour our rich cultural diversity.