Legacy Magazine: What Does “Wealth” Really Mean?
by Dr. Lee Hausner
The concept of wealth is not just a number on a bank statement, as people feel wealthy in ways that have little relationship to financial resources. Our strong Jewish tradition of tikkun olam, which is typically translated as “repair the world,” is a core value of philanthropy and leads to a sense of spiritual wealth and well-being. When working with families, I like to use the concept of philanthropy as a framework for “healing or enriching the family” as well as our greater society.
It’s useful to look at wealth as being the total of four important capital accounts:
- Social Capital
- Human Capital
- Intellectual Capital
- Financial Capital
Successful families work to build up the accounts in each of these areas.
How do we define these capital accounts?
Social Capital not only refers to financial contributions, but to volunteerism, public service, and leadership in the nonprofit community. Social Capital plays a role in not only fulfilling the goals of tikkun olam but also provides opportunities to enhance the strength of the other three important capital accounts.
Human Capital consists of effective parenting and grand-parenting, collaborating, conflict resolution, team building, communication, shared values, morals and ethics, and spirituality. When a family works together on their philanthropic activities, when everyone contributes to joint decisions, there are opportunities for collaborating, understanding family values, communicating in a productive non-judgmental manner, and building the family team. When multiple generations work together, grandparents are able to share their wisdom and experiences and this enhances the family legacy. This places deposits in the Human Capital account.
Intellectual Capital involves education, career choices, coaching and mentoring, and governance, which is the process by which decisions are made in multigenerational families. Members of the rising generation often struggle. Sometimes the types of activities that have involved the family philanthropically open the door to career choices or to seeing work in the nonprofit sector as a career goal.
If the family has organized their philanthropy through either a family foundation or Donor Advised Fund, the younger generation has exposure to governance issues and the accountability of board members to regulations governing philanthropy. This can prepare them for board involvement in the future and gives the younger family member a unique opportunity to be mentored by their more experienced board colleagues. Thus the Intellectual Capital account is increased.
Senior family members have a responsibility to ensure that the next generation understands stewardship of the family’s financial resources.
Financial Capital encompasses how to make money, manage money, invest money, resolve family business issues, and understand how one’s relationship with money affects financial decisions, good or bad. The importance of building the Financial Capital account needs little justification.
Senior family members have a responsibility to ensure that the next generation understands stewardship of the family’s financial resources. In families of more modest means, all members of the family are involved in daily financial choices. Young family members work during high school to have their extra spending money, as an automatic allowance is not in the family budget. College will require student loans, and money dominates many family conversations.
Contrast this to life in a more affluent household where money seems to be readily available for whatever one may desire. In this environment, families must be intentional in building financial literacy within successive generations, and philanthropy offers a way to learn. For example, family members can evaluate their giving by examining the budgets of the requesting organizations and then receiving a report as to how the money was used. If there is a foundation, junior family members can observe the activities of the investment committee so they begin to understand the world of investing. This can be done with a Donor Advised Fund at the Jewish Community Foundation because investment reports from the organization can be used as instruction for the next generation. Recognizing these philanthropic learning opportunities leads to greater financial literacy.
The greatest reward.
Ultimately the joy in philanthropy is what it does to our spirit and sense of self-worth. How fortunate you are to know that your family’s generous giving has made a difference in the lives of others.
Winston Churchill summed it up beautifully by stating, “We make a living by what we get, but we make a life by what we give.”
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Dr. Lee Hausner is an internationally recognized clinical psychologist, author, business consultant, and family wealth consultant. She served as the senior psychologist for the Beverly Hills Unified School District for 19 years and is the author of The Legacy Family: The Definitive Guide to Creating a Successful Multigenerational Family.
This article was featured in The Foundation’s Summer 2021 Legacy magazine.