Investment in the Rising Generation: Building on Your Family’s Intangible Capitals
Hoge Family Portrait, 2012
Introduction
Preparing the next generation for the future is a significant challenge for families and family enterprises. It involves ensuring the continuation of the family and preserving its legacy. We have developed a structured approach based on the Family Balance Sheet philosophy to address this complex task.
What is a Family Balance Sheet?
As described by James (Jay) E. Hughes Jr., a family balance sheet is a comprehensive tool families use to assess and manage their collective wealth, both tangible and intangible. Hughes emphasizes that a family balance sheet goes beyond just listing financial assets and liabilities; it includes a broader perspective on the family's intellectual, social, spiritual, human capital, and legacy capital. This holistic view allows families to align their financial wealth with their values, goals, and legacy, ensuring they can sustain and grow their wealth across generations while fostering unity and well-being among family members.
The key elements of a family balance sheet we have included in the development process:
Financial Capital: The traditional assets and liabilities, including investments, properties, cash, and debts.
Intellectual Capital: The knowledge, skills, education, and scholarly contributions of family members.
Human Capital: The health, well-being, personal development, and emotional resilience of family members.
Social Capital: The family's relationships, reputation, and network within the community and society.
Spiritual Capital: The core values and beliefs of individual family members, as well as those collectively as a family.
Legacy Capital: Legacy Capital is like a quilt that connects our family's past, present, and future, comprising special items and memories that define our family's identity and history.
How the Plan is Structured
Using each family's intangible “assets” analogy, we developed a program to assist them with investment solutions for the development of future generations.
Financial Capital
This development program isn’t about financial balance sheet but rather educational development in each area. For Finance Capital, here are some examples:
Money-savvy: Children can learn the value of money from a pre-school age. It starts with being able to count, then progresses into earning and saving. A structured way to purposely teach children about the value of money is key.
Family Bank: As parents, you may give your children an allowance or have chores set up for them for their earning potential. You can take it to the next level by setting up a family bank where young children can save their money in a piggy bank but earn interest. They can see their money grow. Formalizing with an actual bank structure can also be done as they enter their teens and twenties.
Investment Education: Teach the younger generation about financial management, investing, and the principles of wealth stewardship. Consider setting up small investment accounts where they can learn to manage money under guidance.
Intellectual Capital
Fostering the development of family members' knowledge, skills, education, and scholarly contributions in a systematic and organized fashion is crucial. Here are a few suggestions to help with that:
Mentorship and Knowledge Transfer: Encourage family members to pass their knowledge and skills to the younger generation. This can be done through structured mentorship programs, family workshops, or regular discussions about personal and professional experiences.
Support Lifelong Learning: Adopt a culture of curiosity and continuous learning. Provide resources, such as books, online courses, or seminars, that align with the interests and career aspirations of the younger generation.
Encourage Innovation: Support entrepreneurial or creative projects by providing financial and intellectual resources to help young family members explore and develop their ideas.
Human Capital
Growth in family members' health, well-being, personal development, and emotional resilience also involves leadership development. Here are some ideas:
Health and Wellness Initiatives: Invest in the physical and emotional well-being of the next generation. This could include providing access to healthcare, wellness programs, mental health support, and activities that promote a balanced lifestyle.
Personal Development Programs: Encourage the next generation to pursue personal growth through leadership development, emotional intelligence training, and self-awareness practices. Provide access to coaches, counselors, or mentors who can guide them in these areas.
Leadership Projects: Exposure to projects that allow them to test out their leadership prowess. Have them lead a family council meeting or coordinate a family celebration. They can even create a secondary junior board for your enterprise.
Social Capital
Building strong connections and fostering your family's relationships, reputation, and network within the community and society requires thoughtful consideration and strategic planning. Here are our suggestions:
Community Engagement: Encourage the next generation to build and maintain strong relationships within the community. Support their involvement in philanthropy, volunteerism, and community leadership roles.
Networking Opportunities: Leverage the family's existing social networks to create opportunities for the younger generation. Introduce them to mentors, business contacts, and influential figures who can help them personally and professionally.
Family Unity and Communication: Foster open and transparent communication within the family. Regular family meetings, retreats, or councils can provide a forum for discussing goals, addressing concerns, and making collective decisions.
Spiritual Capital
Creating the core values and beliefs of each family member, as well as those that unite us as a family, demands a thoughtful strategy. Here are some things to consider:
Character Building: Emphasize the importance of values, ethics, and character. Share family stories, traditions, and the principles that have guided previous generations, fostering a sense of identity and purpose.
Purpose Statements: Encourage each family member to create their own purpose statement (see Individual Purpose Statement). Have them refine it until they decide on a Purpose Sentence. Even make it fun by imagining their “spirit animal.”
Rituals: Create family rituals, either religious or non-religious. Examples would include saying your prayers or your family mantra. One of my favorites is, “We don’t lie, and we don’t litter.” Create out-loud words to instill values, such as, “The World is Yours,” or “Education is something that can never be taken away.”
Legacy Capital
Developing Legacy Capital encompasses your family's rich history, traditions, and aspirations. It embraces the unique heirlooms and cherished memories that shape our family's legacy. Here are our insights on how to cultivate this heritage in the next generation:
Governance: Create an inclusive family council. Take the journey into designing a family charter. Publish a Family Strategic Plan for 50, 100, or 250 years.
Research, Record, and Teach: Have you explored your family's rich history? What are your plans for passing it on to the next generation? Consider starting a joint research project to uncover stories from the past. You can document these stories in writing, through oral recordings, or even videos. Additionally, you could engage your family in learning about history by organizing activities like playing Family Feud or Jeopardy with "Did You Know?" questions about your family.
Honoring or Creating Traditions: If your family has a family tradition, ensure it is practiced and passed down to the next generation. Explain the meaning behind it. Have some fun and engage the rising generation by inventing their own traditions.
Conclusion
Early preparation is crucial for building the family balance sheet for future generations. It's important to start teaching family values, mission, and vision from a young age. Introducing children to the concept of family "assets," they start to understand and appreciate the hard work, dedication, and strategic thinking needed to be a successful family unit. This creates a foundation that helps boost their confidence and interest in reaching their full potential. Your family and family enterprise have the power to succeed today and create a legacy that will inspire pride and purpose for generations to come—time to Make Things Happen.
