Ways To Build Generational Wealth Strategies (Part 3 of 4)
What is Generational Wealth? Generational wealth includes financial assets — such as property, investments, money, or anything with a monetary value — that you pass down from one generation to the next. Intangibles like financial education, values, and habits are an equally important part of the equation.
Why Is Generational Wealth Important? Wealth gives you more options in life. You have more freedom to think and live the life you want when you don’t have to worry about paying your bills or whether you can afford to quit a job that doesn’t fulfill you.
Challenges of Building Generational Wealth - Unfortunately, the default for parents is to work hard and pass down assets. But, that scenario is unlikely to work in most cases. That’s why an estimated 70% of generational wealth doesn’t make it past the second generation, and 90% disappears by the third.
Here are a few ways to build generational wealth:
17. Invest in Real Estate
18. Invest for the long term with stocks and real estate
Education is a good foundation, but you need to invest when building real wealth. Common money advice is to save your money. However, just saving money will get you nowhere on the path of wealth building. Saving money is good, especially for an emergency fund or savings goals, but growing your money is the mission.
19. Build a business that can operate without you
Many business owners are solopreneurs, and therefore, everything depends on one person. For example, a plumber owns a small business that includes him or herself, the work truck, and some tools. Meaning they are their only employee. When they take time off, business stops. Moreso, unless the plumber has a child or another family member who is interested in being in the plumbing business that they also trust, the plumber can't pass their business down to family.
20. Use an estate plan
The saying, "If you fail to plan, you plan to fail," definitely holds true in building generational wealth. Choosing not to plan by neglecting to have a will or create a trust is not just denying your mortality, but it is robbing your children or family.
21. Investing in stocks and crypto
To build net worth, most advisers recommend investing in the stock market, particularly in index funds. The upside of investing in index funds is the rapid diversification and ease of management. You can start buying low and try to sell high to try to make money through capital appreciation.
22. A will or trust Building generational wealth through a trust or a will is a customary estate planning method to protect assets. A will is a legal document that states your final wishes on distributing your financial assets or care of your young children. On the other hand, a trust is a legal arrangement where one party, called trustor, gives another party, known as a trustee, the legal authorization of holding and transferring assets on behalf of a third party, the beneficiary.
23. Educate Your Kids Saving and investing money is a vital life skill, but it doesn’t come easy. The best inheritance you can give your children is a good financial education. Teaching your kids can help them understand the value of money, grasp the concept of delayed gratification and guard them against unnecessary spending. Also, they’ll better understand the choices you made to get to this point.
