Building wealth that outlives you

Generational wealth has become a hot topic in recent years, sparking important conversations about financial literacy, long-term stability, and legacy. But what is it really—and how do you build and sustain it across generations?
A key misconception about generational wealth is that it only refers to tangible financial assets. But that is not the case.

“Generational wealth is more than financial assets. It includes intangible assets such as education opportunities and/or know-how, networks, partnerships, and family values and resources that are passed down from one generation to the next," financial advisor Ronald Mukasa says.
"Generational wealth provides a long-term financial safety net for future generations, breaking cycles of poverty, enabling them to pursue and invest in opportunities that would otherwise be out of reach," financial expert Charles Ocici emphasizes.

According to the National Financial Inclusion Strategy 2023 to 2028, investment in Uganda is primarily facilitated through Securities Exchanges, related brokers/dealers, fund managers, investment advisors, and Collective Investment Schemes (CIS) - being the most popular channel for individual investors.

Despite a significant growth in Assets under Management (AUM) from Shs1.3 trillion to Shs1.46 trillion and an increase in CIS accounts from 34,467 to 40,155 investors between June and September 2022, representing a 12 percent and 17 percent growth respectively, the adoption rate remains low, with less than 1 percent of adults utilising this investment product. This highlights a gap in wealth-building strategies. However, with the appropriate approach, families can break the cycle of financial instability.

Building generational wealth in Uganda is not about overnight success. 
“It is a gradual journey that requires working with both the country's realities and opportunities," says Flavia Nabukwasi, a financial literacy advisor at Uganda Bankers Association.

1. Start, formalise and grow a business
A key component in building a financial legacy is to not only start a business (es) but formalise it. Ms Nabukwasi advises that there is a need to formalise your income stream(s) because informal businesses often die with the owner, lack legal protections, and have limited or no access to financial incentives. So, one needs to register their business, open a separate business bank account to avoid mixing personal/business funds, and use movable assets such as motorcycles, machinery as collateral for loans under the Movable Property Securities Act.

Ms Nabukwasi illustrates the impact of formalisation with two scenarios:
"Imagine a typical farming family in Masaka. For generations, they have grown maize on their small plot, barely making ends meet. The turning point comes when they stop selling raw maize and start processing it into flour. By pooling resources with neighbours through a cooperative, they can afford a small milling machine. Suddenly, they are not just farmers but also business owners who can command better prices and weather market fluctuations. This is the first crucial step in moving from subsistence to value addition.

In towns and cities, another story unfolds. Betty, a market vendor in Kampala sells second-hand clothes. For years, she operated in cash, with no records or bank account. When she registers her business and starts using mobile money for transactions, everything changes. She can access small loans to expand her inventory and put aside money for her children's education. Her story shows how formalisation at a small scale opens doors to growth."

"A well-established (family) business can generate significant income and be passed down to future generations, providing them with both financial security and entrepreneurial opportunities," Mr Charles Ocici, the executive director of Enterprise Uganda, adds.
This approach can tap into Uganda's long-standing entrepreneurial and startup ecosystem. According to the Global Innovation Index Report 2024, Uganda's startup ecosystem ranks third in East Africa and 95th worldwide.

2. Diversify your income streams 
Diversifying your income streams reduces financial risk and increases stability as relying on a single source of income can leave you vulnerable to unexpected changes. By building multiple income streams, such as investments, side businesses, rental properties, or freelance work, you create a financial safety net and open up more opportunities for long-term wealth and independence.

"Diversify like your life depends on it because it does. Relying on one income stream risks total loss," Nabukwasi emphasizes.
Wealthy people such as Sudhir Ruparelia, who in 2018 was ranked by Forbes magazine as Uganda's wealthiest at $1.2 billion, has interests in real estate, hospitality, finance and education.

The 2021 PwC East Africa Family Business Survey Report reveals that Madhvani Group is one of the most diversified private organisations in East Africa, with interests in agriculture, agro-processing, hospitality, information technology, media and communications, packaging and construction.
Statistics by the World Bank 2022 show that Ugandans with three income-generating activities are five times less likely to fall into poverty.

3. Invest in appreciating assets
Diversifying into real estate, stocks, government bonds, or Savings and Credit Cooperatives (SACCOs) can provide stability.

Land and property remain the most reliable assets in Uganda, - with urbanisation driving demand in cities like Kampala, Entebbe, and Jinja, real estate appreciates over time.

"One of the commonest and reliable means of building generational wealth is investing in real estate. Property values tend to appreciate over time, providing a steady stream of income through rental properties. Furthermore, real estate can be passed down to future generations, providing them with valuable assets that can continue to grow in value," Mr Ocici notes.

With the increase in cases of land fraud (46.5 percent) as indicated in the 2024 Annual Crime Report, there is a need for one to carry out due diligence when purchasing land. These include searches at the registry, inquiries about the land from community leaders and neighbours, to mention but a few. Subsequently, proper documentation protects the land owners, especially in times of disputes.

Another venture for building generational wealth is investing in agriculture and agro-processing. According to the recent statistics from the Uganda Bureau of Statistics 2023, agriculture contributes 24 percent of Uganda’s Gross Domestic Product (GDP). This means that commercial farming and agro-processing present lucrative opportunities, evident from the success stories of companies such as Jesa Farm Dairy and Kakira Sugar that, over time, have grown from small ventures into multimillion-dollar enterprises.

"Investing in the stock market is another effective way to build wealth over time. By diversifying your investment portfolio and taking advantage of compound interest, you can provide a stable financial foundation for future generations," says Mr Mukasa "However, educate yourself and your family members about the stock market to ensure that investments are managed wisely. This is because generational wealth requires the capacity to transfer both tangible and intangible assets, such as the know-how and experience," he adds.

4. Prioritise education and financial literacy
Education and financial literacy are critical aspects in building generational wealth. Nabukwasi highlights that there is a big financial literacy education gap.

"Ugandan schools rarely teach financial literacy, leaving families to repeat money mistakes. Parents might save tirelessly but lose savings to inflation or poor investments. Younger generations, eager for modern careers (like tech or white collar jobs), may reject family farms or shops, seeing them as "old-fashioned," creating a disconnect in legacy building," Nabukwasi explains.

Mr Ocici states that by investing in education, you equip future generations with the knowledge and skills they need to succeed financially. Proritising education, whether through academic education or teaching financial literacy at home, can ensure that your descendants are well-prepared to succeed, manage, and grow the wealth they inherit.

"Passing down intangible assets such as financial knowledge, family business values and mission, networks, experience and/know-how, is just as important as passing down tangible assets. Teaching your children and grandchildren about budgeting, saving, investing, managing debt, family business values and objectives can empower them to make sound financial and business decisions throughout their lives. Education and financial literacy is a critical component of sustaining and growing generational wealth," says Mr Mukasa.

In the 2021 PwC Family Business report, Joseline Kateeba, a second generation family business owner and managing director of Crest Foam, recommends that the owner/founder generation exposes the next generation to the business from an early age, even as interns in secondary school, and communicates an openness to new ways of working.

"Accountability and a strong work ethic begin at home," she adds. “It can be hard to hear because parents want to give their children the best of everything. But how you manage money and encourage creativity and hard work will influence the professionals that your children become,” Kateeba says.

Mr Mukasa emphasizes that it is crucial to educate yourself not only on the laws about your business but also the tax implications on the business or investment. Additionally, on minimising tax liabilities, Ms Nabukwasi advises individuals to explore the following strategies:
▪︎Tax advantaged Accounts: Utilise tax-deferred accounts, such as retirement accounts, to grow wealth while minimising taxes.
▪︎Consider setting up an investment company to hold income-generating assets, which can be taxed at a lower rate.
▪︎Take advantage of tax exemptions for certain investments, such as those in private equity and venture capital funds regulated by the Capital Markets Authority.
▪︎Ensure timely payment of property taxes to avoid penalties and take advantage of potential benefits, such as linking property rates to tangible benefits.
▪︎Consult with a tax professional or financial advisor to develop a personalised strategy for building generational wealth while minimising tax liabilities.

5. Leverage technology, financial tools 
With the digital transformation at an all-time high, Ms Nabukwasi acknowledges that digital tools reduce costs and automate growth. She advises learning to use mobile savings, for instance, MoKash offers 10 percent percent interest on savings. 

Insuring critical assets, for example, Jubilee Health Insurance covers hospitalisation. Automating investments, for example, National Social Security Fund’s (NSSF) voluntary contributions, are deducted from mobile money. Ugandans using mobile savings save 42 percent more annually  , according to a 2023 report by Financial Sector Deepening Uganda.

Ms Kateeba asks next-generation business leaders to “bring something valuable to the business by identifying their genuine areas of interest and developing their leadership potential."

6. Create a succession and/or estate plan
Proper planning ensures smooth transfer of businesses or investments, as well as management and distribution of the assets even after the departure or demise of the founder/previous generation.

A 20-year study by the Williams Group found that 70 percent of wealthy families lose their wealth by the second generation and 90 percent by the third, often due to lack of financial literacy, feeling entitled and lazy, as well as poor succession planning. Without proper planning, wealth can dissipate due to family disputes or poor management. Legal structures, like but not limited to Wills and trusts can ensure smooth transitions.

"Ordinary families can start by drafting a Will. It is estimated that around 5 percent of Ugandans have a will in place or hold regular family meetings to align on business roles. Protect what you build by involving your family in financial decisions early," Ms Nabukwasi says.

"For families who may not have substantial assets to pass down, life insurance can be an effective tool in building generational wealth. A life insurance policy can provide your descendants or beneficiaries with a significant financial payout, helping them maintain financial stability and continue building wealth, even after your demise," says an advisor from an insurance company that sought to remain anonymous.