Do you want to know how to build generational wealth?
Building a financial legacy and offering your family stability, freedom, and opportunity may seem intimidating, but don’t worry! You can take steps and rise from your humble beginnings by reading our guide on the top 10 strategies for building generational wealth today.
You’ll find everything from tips on saving money to investing in property. We’ve compiled all the best advice into one easy-to-read guide, so you can get started today.
What Is Generational Wealth?
Generational wealth is a term used to describe accumulated assets, usually property, that has been passed down through younger generations. It’s a way of thinking about building personal finance that focuses on the long-term process of accumulating financial assets over multiple family generations.
In other words, building generational wealth is about looking at far more than just your immediate needs and trying to build equity – not only for yourself but also for future generations. This approach to finance is especially useful if you want to ensure that your family’s wealth goes on after you die and isn’t at the mercy of inheritance tax and legal fees.
Rather than focusing on what you can achieve now, you can start thinking ahead and preparing for your family’s financial future.
Why Is Generational Wealth Important?
You may be questioning how important generational wealth is for you and your family. Focusing on building generational wealth is very important because it enables you to plan for the future, set goals, and make long-term financial decisions. It’s especially important if you want to avoid spending your retirement years living in poverty or having to sell off family belongings to survive.
Generational wealth is vital if you want to maintain the lifestyle of your immediate family, while also ensuring that your extended family has access to these financial assets in the future. Other benefits of generational wealth include being able to take advantage of compound interest and grow your wealth exponentially over time.
Building generational wealth can secure every child’s education in your family and potentially be able to live more freely in the future. Having a long-term plan and a vision for your family is an important starting point in building your wealth today.
Of course, that’s not all. We’ve also compiled a list of the best ways to save, invest, and cut costs when you want to start creating generational wealth today. We have tips for creating multiple streams to increase your net worth and maintain your legacy wealth!
The Top 10 Strategies For Building Generational Wealth
Start Early
The earliest you can start to create generational wealth, the better. Having good financial habits at a young age can make a real difference to your future. Aside from starting an emergency fund to protect yourself, you should also start looking at ways of growing your wealth.
The earlier you do this, the more time you have for these investments to grow. The more time your money has to grow, the higher your profit you’ll have. To begin with, you need to make sure that your savings are invested wisely and work as hard for you as possible.
You should also get advisory services from an expert to help and constitute legal advice and make sure you’re following all the tax rules and regulations. Once you know how to save, invest, and cut costs, you can now start building generational wealth with property.
Invest In Yourself
Your college education, experience, and skills are likely to be your most valuable belongings. You need to use them to build wealth and maintain your many assets. Having a financial education can also help you create the right strategy for your family’s future.
This requires careful planning and foresight, but it’s an investment that can pay off for you in the long run. It also offers you the chance to learn new skills and gain new knowledge.
Your current financial situation is a great factor to consider when deciding where to invest your time and money. If you’re struggling for cash, you should try learning how to save more money.
Set Up A Trust Fund
A trust fund is a great way to allow your family to benefit from the money you’ve saved and invested, while also taking advantage of tax shelters. Your children’s education is one of the most important investments you can make.
There are several different trust funds that you can set up, which allow you to maintain more control over your money without having to pay inheritance tax.
Trust funds aren’t just for ultra-wealthy families. Anyone can set up a trust fund; get advisory services from experts to help with inheritance issues. It’s one of the best strategies to build your own wealth today.
Invest Your Money
This is one of the most important strategies you can use to build generational wealth today. Investing your money isn’t all about stocks and shares, you can invest in real estate or life insurance too. You don’t need to be ultra-wealthy either.
You can make small investments that grow over time. For example, you can start with a down payment of that house you like, get life insurance, or a portfolio of blue-chip stocks.
Having a strong financial education will help you make better investment decisions, so you can grow your wealth faster. You should also try to work with an expert who can help you understand the market and come up with good investments.
Start Your Own Business
Owning your own or family business is one of the best ways to build generational wealth, especially if you want to avoid inheriting any family conflicts over money. The business gives you the chance to have complete control over how your money is invested and saved.
There are many ways to run a family business either part-time or full-time, so take a look at our list of family business ideas and see what you could do today to improve the long-term prospects of your company.
Having an established business to pass down to your children is a good way of building generational wealth. You stay in control, and that means that you can make important decisions about how to run your business and maintain your wealth.
Diversify Your Portfolio
Having resources from different sectors and industries in your portfolio is a great way to build wealth, especially if you want to make sure you’re protected against unexpected events.
Your best bet when it comes to diversification is blue-chip stocks and shares. These are high-value investments that offer a steady return over time. However, you can also diversify with property investments. This could be buying an investment property or investing in the rental market.
Know Your Risk Tolerance
If you want to find out your risk tolerance, you need to think about how comfortable you are with the uncertainties of investing. You might have a high-risk tolerance when it comes to dealing with speculative investments like stocks and shares, but be more conservative when it comes to cash deposits or blue-chip shares.
This will help you plan for the long-term and decide how to build generational wealth in the future. Being young adults with unstable financial life is challenging, which is why many of us search for different ways to grow our funds and make them work for us.
Stay Disciplined
At a very young age, it’s easy to feel invincible and that you have all the time in the world to build your wealth. However, having a healthy level of discipline is vital if you want to make sure you can follow through with your investment plans over the long term.
Building wealth isn’t easy, whether you want to invest in property or shares. That’s why it’s so important to stay disciplined in life with your plans and commit to achieving your long-term financial goals for the next generation.
You need to have a plan when it comes to business and investing in the stock market, even if that plan is a simple one. And you might find it useful to make a budget and a set of financial goals that you want to achieve, then regularly monitor your progress towards those goals.
Make Saving A Priority
Save, Save, Save!
As we’ve said already, saving is the most important part of building wealth. If you don’t know how to save money, then you’ll be unable to build up any kind of war chest for investing in generational wealth.
The best way to save is by setting up a dedicated savings account that works especially hard for you. If possible, choose an account with bonuses and high-interest rates so you can have a higher return on investment.
Besides a savings account, you could also keep your money tax-free. However, we recommend keeping cash assets separate from investments to make sure they’re safe and secure.
Get A Life Insurance Policy
Life insurance is an essential part of creating wealth because it makes sure your family won’t suffer financially when something tragic happens to you. Also, life insurance products help families pay off debts and mortgages when a breadwinner dies unexpectedly, as well as protect them against financial hardship.
You may choose one life insurance policy from this article that would be best for your circumstances.
Investment Options To Build Generational Wealth
Stocks
Having stock market investments is a great way to start building your generational wealth. The money coming from stocks and shares – or your profit, is often very consistent, which helps you keep a steady flow of income.
You could choose to invest in blue-chip companies or a more speculative business with higher risk profiles. However, you need to make sure you’re ready for the ups and downs of the prices in the stock market before investing your money in it.
Robinhood
Robinhood is a great tool that lets you invest in stocks with low fees! You can trade US stocks, options, and cryptocurrencies on the go, anytime. This investing app is a must-have if you want to diversify your portfolio with blue-chip stocks and shares. Your second generation will be able to build generational wealth with Robinhood!
Betterment
Building generational wealth is easier with Betterment. You can easily diversify your portfolio by investing in stocks, ETFs, and more than 1,000 types of bonds. With this app, you’ll never have to worry about the ups and downs of the stock market again because it does all the planning for you.
You can also pass down your account to second-generation family members when you’re gone and let them manage the investments and profits.
Retirement Investment Accounts
Another option for building generational wealth is to put some of your savings into a retirement investment account like an individual retirement account or IRA.
Retirement accounts are tax-free, which means you can use the tax advantages to invest in blue-chip stocks and assets with lower financial risk. You even get some great discounts on services like travel insurance when you access these types of accounts!
You can also cut your taxes by moving assets into an IRA if you’re self-employed or make more than $150,000 a year.
Certificates Of Deposit (CD)
CDs are another way to create wealth because they offer low-risk investments with high returns. CDs are even better than savings accounts because you can choose how long you want to invest in one company. Thus, when interest rates go up in the future, your investment will reap bigger rewards.
Retirement accounts often have age restrictions or penalties for withdrawing before your retirement, but CDs have no such restrictions. You can buy a CD and withdraw at any time without incurring a fee.
The monetary value of CD investments often fluctuates over time, so you should be sure to check the interest rates before investing any money.
Real Estate
Another popular way to build family wealth is through real estate investment. The real estate market is a stable asset that can provide you with regular rental income. This means it’s an easy way to diversify your real estate portfolio away from stocks and shares.
If you invest in real estate properties, make sure they are through a corporation. Individual tax rates are very high, but corporations can still provide rental income. The best thing about investing in real estate is you can easily buy real estate properties in bulk, which means you can diversify your investment across several different properties.
You should consider the fees before making any investment decisions, but buying real estate in bulk is one of the best ways to secure a stable cash flow for your family if something goes wrong.
How To Pass Down Generational Wealth
Writing A Will
The most important thing you can do to pass down generational wealth is to write a will. A will ensures that all the money you earned and saved during your life goes where it should. This can be a powerful incentive if you own lots of assets or have family members expecting an inheritance.
Your next generation will benefit from the money or family businesses you have, as well as any assets you buy or accumulate. So it’s worth putting some of your assets into a will if you want to go down in history as a great financial role model!
Setting Up Custodial Accounts
Another great way to make sure that your family benefits from the wealth you’ve built, is by setting up a custodial account.
Custodial accounts are governed by a third party until the child reaches the age of 18 or 21(depending on the laws of the state of residence), which means your minor children can’t touch their money unless they reach the legal age. This allows you to invest in assets that you can be confident about, and ensure that your child’s financial future is secure.
Creating An Estate Plan
An estate plan should be used as a way to preserve and continue family wealth. You can use it to distribute assets between your family without any problems, which is an easy way to pass down means from one generation to another.
Likewise, most parents want their child to be the only heir of their legacy. Thus, they should create an estate plan to secure their child’s education and future.
Naming Beneficiaries For Your Accounts
Naming your beneficiaries is another way to make sure your family benefits from your investments. For example, you can name a beneficiary for your established business to pass down from one generation to another.
You should always check with an estate planner before making any decisions about the future of your money because it’s an important step in securing your family’s financial stability. This is also a great way to settle things and distribute your assets to avoid family conflicts when untimely death happens.
Final Thoughts
The biggest thing you should remember when building generational wealth is to diversify your investments. Diversification helps to reduce the risk involved with investing – if one sector of the economy doesn’t work out, others can make up for it.
Aside from managing your money, you should also need to grow your net worth. But don’t get too caught up in the idea of making huge profits overnight. Instead, take steady steps forward and work to build your generational wealth over time.
It’s common for people to invest in high-risk assets when they want to achieve quick results, but in reality, the most effective way to build generational wealth is through slow and steady growth.
Building generational wealth takes time because you need to make investments that will help increase your income, but it’s a great way to achieve financial freedom that you may pass along to your children. The question is, are you willing to work hard and start creating that financial legacy for your future generations today?
Your Turn
How do you build generational wealth for your loved ones? Comment below!