Writer Ayn Rand once said that, “Only the man who does not need it, is fit to inherit wealth – the man who would make his fortune no matter where he started.”
Truth rings clear in her words. Surveys have shown that less than a third of family wealth tied up with businesses makes it to the second generation. And only about 5 percent from that second generation makes it to the third. Riches to rags in three generations … every culture has the same sad tale. Is it possible to improve on those odds?
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Mark Daniell, author of Strategy for the Wealthy Family thinks it’s difficult, but not out of reach. “People just don't think multi-generationally, don't think about long term management and don't think about the kind of strategies that a family office or a deeply thinking family can put in place,” Daniell tells CNBC.
So it’s not just about money. It would seem those who want to preserve their wealth across space and time need to have a multi-generational strategy. This would involve distribution policies, investment strategies, trust structures and most important of all, educating the next generation.
We put this to the test and asked investor Jim Rogers, chairman of Rogers Holdings and father of two little girls, what his take on wealth preservation is.
Rogers thinks the best way to preserve wealth is to make money. His single best investments – his daughters – and Rogers is set on making sure they get the best education possible.
“I want my little girls to grow up understanding Asia and speaking Mandarin. I think the best skill that I can give people born in 2003 and 2008, is to be fluent in Mandarin and to know Asia,” says Rogers.
“It's the best investment I can make in my lifetime now, you know for my future, their future, says Rogers, with Happy age 6 and Baby Bee, just a year old, one on each knee. “It (speaking Mandarin) will not make them successful … there are a lot of people who speak Mandarin who aren't successful. But at least it will give them a skill, which would be useful in their lifetime.”
We’re all familiar with Rogers’ bullishness stance on China. But so firm is his belief of the Asian century that he moved his whole family to Singapore to ensure that China and Asia were part of his children’s future. Happy has been so immersed in the culture that she's been speaking Mandarin since she was born.
“When Happy was born, when Baby Bee was born, we got a Chinese governess who lives with us. She only speaks Mandarin to both of them so that they're growing up with two native languages, Mandarin and English … Happy speaks Mandarin as well as she speaks English and Baby Bee can understand both languages already,” Rogers says proudly.
To Rogers, the bottom line is this – preserving wealth for generations to come involves giving them life skills, not just trust funds.
And so the saying goes, ability is the poor man’s wealth.
For most high net worth individuals with long-term objectives, it’s always about the family. Whether you’re American, European or Asian, it's invariably about the children and the grandchildren.
Teach your kids how to make money and hopefully, the family wealth will stick around longer.
How can investors keep their money safe and make it grow? The old rules of investing do not apply any more. Join Martin Soong in CNBC's new program "Protect Your Wealth" at these times.
6th June: 0600, 1100 (Singapore/Hong Kong Time), 0800, 1300 (Australian EST)
7th June: 0700, 0930 (Singapore/Hong Kong Time), 0700 (Australian EST).