The problem with intergenerational wealth

In 1997, the newly married couple arrived in Sydney from Fiji. In Fiji, their radiography jobs had earned them around $5,500 a year; in Sydney this increased to $37,000 each.

“We immediately made a decision that we’ll just survive on one person’s salary and squirrel the other one away, which was part of our deposit,” said Victor Kumar.

“We came in February, and by October we were starting to look for a home.”

Their first investment property soon followed: a two-bedroom unit in Campbelltown that they bought for $70,000.

All the while, they were doing everything in their power to maximise income and minimise expenses. According to Victor Kumar, it was a frugal life.

“In the first two years, we had racked up about $80,000 on credit cards and personal loans, just paying for courses and going to seminars,” he said.

Meanwhile, Reshmi Kumar upgraded her radiography qualifications at Charles Sturt University to achieve a higher income.

Even while working, the couple managed to squeeze property into their schedule.

At one point, Reshmi Kumar was working in a hospital on the south coast, where she had a two-hour lunch break.

“In that two hours, I would drive around,” said Reshmi Kumar. “I’d prepare those letters of offer and drive around in the suburb, and drop the letters of offer into those mailboxes.”

If all went pear-shaped, the couple had a pact that they would go right back to where they started: back in Fiji, with $4,500 in cash to their names.

In the end, the Kumars did not have to make this choice. Today, they are full-time property investors and are able to raise their two daughters with a very comfortable lifestyle.

Now, however, they must grapple with the question of how to instil the values of hard work into their kids, who have never known financial hardship.

“Often when you have this sort of wealth, it’s usually lost within one or two generations,” said Victor Kumar.

“My eldest daughter mentioned the other day: ‘It’s all good for you and mum to really drive yourself, because you’ve come from right at the bottom in terms of capability, finance, that sort of thing. Whereas I’m up here now, and it’s harder for me to leverage from there, so I need to look at bigger, bigger things.’”

Victor and Reshmi Kumar acknowledged that their extensive portfolio was a great gift for their kids, but noted that it can sometimes be a hard gift to rationalise.

“It’s important to educate them,” Victor Kumar said. “There is some advanced estate planning that we are doing where we will give them the control but not the ownership, so that it protects any event of divorce or any frivolous sell-downs.”

“They’ve got to earn it,” he concluded.

Listen to the full conversation with Victor and Reshmi Kumar here.

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