Generational wealth is one of the most ignored topics in our society. However, ignorance results in financial instability. So, if you want to change your life in a good way, then financial abundance is of utmost importance. Every person wants to give a promising future to their generations. However, if you want to feel light, focus on building financial sources.
What is generational wealth? A breakdown of the definition:
“You can’t focus on building tomorrow without securing your today.”
The word shows that generational wealth passed down from one generation to another. However, in simple terms, we can call it “Legacy” or “Family wealth.” It’s a new concept that is getting famous day by day. The generational wealth could be in the form of money and property. One generation passes down wealth to their kids and so on. Besides, here are the following other shapes of generational wealth:
| Stocks | Bonds | Inheritance |
| Land | Market investment | Insurance benefits etc. |
However, if you want your kids to live a debt-free life, start with a significant growth mindset. It means you will have to multiply your income streams because it’s the only way that can snowball generational wealth.
Importance of maintaining generational wealth:
“In generational wealth, 70% lose it by the second generation, 90% lose it by the third-generation.”
These aren’t good stats, and it happens because the maintenance of wealth takes lots of time and effort. It’s a challenging task that comes with difficulties, and one wrong decision can ruin the whole situation. Thus, it’s an equal responsibility of old and young generations to keep the wealth. For instance, people can use the following ways to pass down the wealth-related knowledge:
- People ignore wealth management education, but it can surely help kids financially.
- Moreover, you can make their life easier by offering free loans upon graduation.
- You can give your kids a head starts in investment or in buying a new home
- The old generations can pass on the wealth in gifts like cash, property, or other valuable items.
Apart from this, you can pass on the ownership to the next generation. In this way, you allow kids to learn from the family business in running condition.
How to start building generational wealth?
If you think about multiplying income sources, you are on the right track. But it’s not as easy as it sounds because it involves so many technical details. Moreover, if you don’t have the right guide, things can be overwhelming, and you can lose wealth. Thus, if you are first, second or third generation, then use these ways to build or maintain generational wealth.
Buy a life insurance plan:
It is the most popular way to pass on wealth. The life insurance policy provides financial aid if anything uncertain happens to you. But before buying a life insurance plan, you must think about the following things:
- How much mortgage do you need to pay?
- What are your educational needs?
- Income that you need to pay the insurance premium and maintain your lifestyle
- What is the total amount that you need to pay off all debts?
Above all, it’s essential to estimate the future debts because you are the one who will pay that amount.
Start a new business:
A new business is always a good idea if you want to pass on generational wealth. According to the stats:
“Around 30% of family-owned businesses made their way to the second generation.”
Moreover, if you are interested in multiplying income sources, it’s a great idea, and you can even start it at a young age. The business has so much potential and helps to earn money. For instance, if your kids aren’t interested in running a business, you can create wealth by selling it. Above all, as per stats, family companies are contributing around 57% to the GDP of the USA.
Invest in the stock market:
If you want to maintain or build wealth, then diversify the portfolio. However, if you’re going to do this, start investing in assets. It’s vital to understand the different assets and liabilities. Moreover, start finding new ways to make money, and the stock market is a great opportunity. It helps to build wealth passively and protect your money from inflation. Many people invest in the stock exchange with a long-term plan and make considerable money.
Note: Investing in the stock market could be scary at first for beginners. But you should take a slow start and try to invest small at first.
Adopt a growth mindset & invest in real estate:
You need to go beyond to start building generational wealth. It helps to give your life a significant turn in a positive way. However, if we talk about a big growth mindset, then start taking an interest in money-making fields. According to experts, real estate is the best way to create wealth in sleep. It’s a significant step that makes money and adds to your overall net worth. You can buy the properties on short mortgage terms like 10-15 years. The property value increases over time, and you can even earn millions of dollars.
Contribute to 401K retirement plan:
You can’t focus on building generational wealth if you live paycheck to paycheck. However, you can break this vicious circle by contributing to the 401k retirement plan. It brings many tax advantages and reduces the taxable income. But it’s crucial to keep track of your payment by maintaining a check stub maker, as it helps individuals and organizations.
Other methods to build generational wealth:
“Around $70 trillion is estimated to transfer between 2018-2042 as generational wealth.”
There are many simple yet beneficial ways to build generational wealth. Earlier, we discussed a few tips, and here are some more that will help to pass on a considerable amount of money:
| Follow budgeting and save money in a savings account | Invest in educational degrees or skills |
| Make a will to pass on the wealth | Invest in bonds or mutual trade funds |
| Buy cryptocurrencies | Certificate of deposits |
Apart from this, you can take the help of annuities to build wealth. But despite all these tips, most families lose their wealth over time. However, the best investment is to educate your child about finances in this condition. In this way, future generations can lift a dead business or they can build new income sources. The process is simple; you only need determination and the right direction to achieve your goals.
Pro tip: If things are overwhelming, you can seek professional advice to build generational wealth. But don’t forget to set goals, whether your wealth or your family.