Generational wealth is often a pearl-clutching topic in many communities and, as a result, is a topic many people shy away from discussing. The change has to begin within the home, starting with communication among family members about intentions and future plans. Often, people are so busy with their daily lives they do not stop to plan for the future or ensure their children have a future set up for them. Below, I will outline tips on how to prepare your family to build generational wealth, and in future articles, I will discuss how to pass down the generational wealth you have created.
Generational wealth is anything with monetary value that is passed down from one generation to the next. This can include property, money, investments and businesses. Intangible wealth is considered education, financial literacy, values and spending habits that are ingrained into your family and sometimes even your culture. These intangible items are a critical part of preparing for the future that people often do not consider.
It is important because people all want to maximize the options they have in life. And having wealth provides options. With this freedom, you can focus on the intangible wealth items that will bolster your family to the next level. You won’t have to worry about a job that does not fulfill you or bills that cannot be met when you have this freedom. Sometimes, daily burdens keep people from planning for the future of the next generation. Many people experience feeling forced to work a job they do not enjoy. Why not plan ahead and give your children a better chance of having the option to choose a job they may enjoy.
5 ways to Build Wealth
1. Financial education. It’s important to remember that building multigenerational wealth requires more than financial assets. For example, if you win a large sum of money but do not have the education to manage it financially, then the money will likely not last through the next generation. Financial education and sharing these tips will begin to create the foundation for lasting wealth.
2. Investing. Start off by assessing your own net worth. That is your assets minus liabilities. Once you have assessed this amount, you are ready to start investing. There are many apps that will let you analyze this data in one place. We all have busy schedules, and investing in the stock market provides the chance to passively build wealth and protect yourself from inflation. It is important to think in the long term with the stock market due to the volatility and unpredictability of certain investments. Investing in the stock market can be intimidating at first, but that is why it is important to research before investing and diversify your portfolio over time. Starting off with low-cost index funds can provide growth over a long period of time at a low cost. Other simple tactics, such as contributing to a 401(k) plan, can make a massive difference. The good thing about investment options is the low barrier of entry to many of them and the availability of information out there to inform your decision.
3. Invest in real estate. Real estate can be a great tool to build wealth. Real estate typically appreciates with time. In addition, real estate can provide cash-flow opportunities for investors. I’ll discuss more on this in the next article of my series on how millennials can build generational wealth using real estate.
4. Saving and creating a business. Through saving, you will have freedom to take more risks and even make investments that could pay off down the line. It is well known that wealth can be generated through business ownership. It might be risky to get started, but the potential rewards can make it all worth it. Many family-owned businesses make it to the second generation. So building a business to pass down to your children is another way to build generational wealth. If they do not want to work in the family business, you have still created an option for them by giving them the choice of selling the business.
5. Life insurance takes the burden off your children. Many of us have been in the unfortunate situation of caring for a loved one despite them not having life insurance. Grief can cause enough stress on the family and adding unexpected financial strain will only set your family back emotionally and financially. Life insurance is an imperative tool to pass down wealth. Especially if you have children or dependents who rely on you, you want to think ahead to how your current lack of insurance could affect them negatively.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.