For many, being able to leave a sizable trust fund, piece of property, or inheritance is the sign of a life wealth’ily lived. It’s human nature for us to be concerned about the future well-being of our loved ones. We want them to succeed, even after we’re gone. But what is generational wealth really, and how do you use it?
It is quite shocking to read that on average ‘rich’ families tend to not be able to sustain their level of wealth beyond two generations.
Let’s start with the definition:
‘Generational wealth is wealth that is passed down from one generation to another. This is through the accumulation of assets for the future to provide financial security.’
If you are able to leave something behind for your children or grandchildren, then you are contributing to the growth of generational wealth in your family.
Of course, you may leave many things such as good memories and healthy genetics behind for your family. However, I’m specifically referring to the financial resources that you are able to leave behind.
This wealth can come in many forms such as real estate assets, stock market investments, or a financial education to carry forward into the future.
Why is generational wealth important?
If you are starting from scratch with your finances or starting out with a large debt burden, then you should realize the importance of generational wealth.
The more you think about your own financial life, the more you realize how important generational wealth can be. If you have kids or plan to have kids, then you may start to think about how their financial futures will play out. Imagine how differently things could turn out if you take the time to educate them on personal finance and set up vehicles to add security to their financial future now.
Educate yourself and your kids with all the necessary financial skills through my courses and consultations. Need help with financial and estate planning? Contact Me for assistance.
How to build generational wealth:
1.Invest in real estate
Real estate is a major way to build wealth for the long-term. With the potential for steady cash flows in addition to increasing values over time, real estate can be a reliable path to wealth.
2.Build a business to pass down
Family businesses have the potential for great success.
Although not all family businesses make it to the second generation, it is possible that yours can. If your interests and abilities align with your children’s, then it is very possible they will want to take over the business you build.
For a great chance of a successful transition, you should include your child in the business from a young age. They need to know how the business operates and how to successfully continue in this business.
Don’t expect them to take over if they show no interest in the business you’ve built. If they are unable or unwilling to take over the operations, then you could consider selling the business to fund generational wealth in another form.
3. Invest in your child’s education
In many cases, education can provide a way for your children to support themselves. With a university degree, many frequently have the opportunity to pursue high paying jobs that can help them navigate their own finances.
Anyone with an education will ALWAYS have that education. Although other things in life can come and go, no one can take away your education. If you have the ability to help your children make it through university then you are helping to set them up for a brighter financial future.
4.Teach your children about personal finance
It is estimated that 70% of families lose their wealth in the second generation. And 90% lose it in the third!
With statistics like that, it can seem pointless to save for a legacy of wealth. However, in many cases, the loss of generational wealth can be prevented through financial education. After all, it is easy to lose generational wealth if your kids have no personal finance knowledge.
If you teach your kids nothing about personal finance, then it is likely the wealth you leave for them will dwindle throughout their lifetime.
The bottom line
Building wealth to last for generations is no easy task BUT it is an admiral undertaking. After you have your own financial situation under control, safeguarding your family’s future is the next step.
Take the time to implement a wealth-building strategy that works for your family. Not everyone wants to invest in real estate or build a business, so find something that works for your situation.
Whatever strategy you choose, make sure to pass down your financial know-how to your children.