This is a follow-up post from last week's post on Building A Lasting Portfolio for Future Generations. As rightly pointed out by some of the readers, creating and maintaining such a portfolio across generations is not going to be easy. But when you think about it, how many skill sets are easy to transfer to the next generation? You might be the best engineer/ doctor/ lawyer etc. and make lots of money based on your skills, but how easy is it to transfer those skills to your children so that they too are going to be the best engineers/ doctors/ lawyers, etc. That is assuming that they wish to follow your footsteps and become an engineer/ doctor/ lawyer, etc.
The conventional way parents "transfer" skills to their children is to get the best education money can buy and leave behind as much assets as possible for them. The latter is about giving them fish so that they could feed themselves for a couple of years, while the former is about teaching them how to fish so that they could feed themselves for a lifetime. This is a good way, because after all, new technologies and knowledge emerge and old technologies and knowledge become obsolete. Beyond the conventional way mentioned above, can you further enhance the chance that your children (and future generations) will do well in life?
The key lies in the fish (i.e. the assets) that we leave behind. Besides just being food, can the fish be used as baits to catch even more fish? Some of the descendents will be able to use their acquired fishing skills in their preferred professions to turn those fish into even more fish. Some of the descendents, however, might need some help in this aspect. Possible ways on how to achieve this are discussed in the previous blog post.
While not everybody will be an engineer/ doctor/ lawyer, etc., we are all money managers, for as long as money is used for all transactions. Being trained in money management will go a long way towards safeguarding our financial security and that of future generations.
Post-script
I managed to find Warren Buffett's advice on how his estate (after making all the donations pledged) should be managed. Below is extracted from Berkshire Hathaway's 2013 annual letter to shareholders:
"What I advise here is essentially identical to certain instructions I’ve laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife’s benefit. My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee managers."
Post-script
I managed to find Warren Buffett's advice on how his estate (after making all the donations pledged) should be managed. Below is extracted from Berkshire Hathaway's 2013 annual letter to shareholders:
"What I advise here is essentially identical to certain instructions I’ve laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife’s benefit. My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee managers."
See related blog posts:
How about Warren Buffet's son?
ReplyDeleteHe will receive some money from his father to pursue his own interests.
DeleteHave also found out how Warren Buffett hopes his estate will be managed and added as a post-script to the blog post. Thanks for the comments.
Closer to home, look at Popular Holdings story :-
ReplyDeletehttps://sg.news.yahoo.com/popular-md-quits-in-fit-of-anger-against-father.html
Father would have already taught the son to be as business acumen as him but son prefers a different style of fishing. How?
Don't get me wrong. It is not necessary for a son to follow his father's footsteps and do what his father does. It is perfectly alright for a son to discover what he really likes and excel in his interests. What I mean is leaving behind some instructions on how the assets could be managed for the benefit of future generations.
Delete