How to Build Generational Wealth

Wherever you are in life, there’s no better time to start building generational wealth than right now! There are many ways to go about it, and we have them spelled out for you here.

What is Generational Wealth?

Generational wealth is the financial assets, resources, and capital you grow past personal needs to transfer from generation to generation. This type of wealth is most effective when each generation accumulates and grows to create an intergenerational legacy. There are many benefits to creating generational wealth for your family:

• Lasting fiscal stability
• Peace of mind and emotional health
• Supports business, educational, and medical expenses
• More opportunities for personal growth and development
• The power to give back to important causes

10 Ways to Build Generational Wealth

There are a variety of ways you can start and maintain generational wealth at any point in your or your family’s lives:

• Budgeting: Creating and sticking to a budget helps you to stay on top of your finances, grow money, and avoid overspending on your lifestyle. Try the 50/30/20 rule, where 50% of your monthly income is for mandatory expenses, 30% for personal spending, and 20% for savings and debt repayment. You should also base your budget on your goals and priorities, so structure it in a way you can save and invest monthly.
• Build a Business: Building a successful business that creates a significant revenue stream can be an asset you pass on to the next generation, especially if it fulfills the needs and demands of your community.
• Buy Real Estate: You can buy real estate for investment purposes, but having a house instead of renting is a great asset to either pass on to your family or sell for extra money.
• Create an Emergency Fund: While saving money won’t make you rich, it will help keep you out of debt. Creating an emergency fund gives you the most control and the least amount of risk with your money so you can continue to build wealth even in hard times.
• Further Education: Being educated, especially financially, is a great way to have a leg up in building generational wealth. Not everyone’s high school provides financial classes to prepare you for dealing with money in the real world. If you choose to go to college, use that as an opportunity to learn more about finances from life experiences and coursework. Otherwise, there are many blogs, books, community education courses, and other good resources that are accessible. You have to spend money to make money, and investing in your education to some capacity is a great way to grow your wealth.
• High-interest Savings Accounts: Making frequent, affordable contributions to a high-interest savings account is great for risk-averse people. The high-interest rate and compounding interest make your money work for you in a safe place.
• Investment Opportunities and Buying Stocks: Investing, or purchasing and holding assets for a long term, results in big gains for you later on. Consider investing in bonds, ETFs, shares, and stocks.
• Life Insurance: If you provide for a spouse or children, life insurance is a large amount of money that goes to them after you pass away, allowing you to continue providing for them, funding their lifestyle, and helping them build their future.
• Passive Income: Earning passive income through multiple financial assets is a great way to make additional money on top of your income. This could be through interest, investments, or receiving royalties or streams of money from art you create, such as books or social posts.
• Tax and Estate Laws: These laws can optimize what goes to the next generation. Take advantage of qualified retirement plans through your employer and look into your state laws, as they are subject to change.

Generational Wealth Transfer

It’s one thing to build up your wealth, but it’s another to take care of the key part that keeps it generational: the transfer. Consider the following when making your generational wealth transfer as smooth and full of potential as possible:

• Create a Will and Family Trust: Your will outlines the specific distribution of your bank and retirement accounts, investment portfolio, personal possessions, and real estate. Establishing a family trust ensures the proper management of wealth by a professional after your generation passes on, wealth is distributed at the appropriate time for the next generation, and taxes are reduced.
• Educate and Prepare Your Heirs: Investing in your children’s education will give them a great boost in building wealth. This is also an opportunity to share your knowledge and experience regarding money. Be sure to also give your heirs a heads-up on what they will receive after you pass so they know how to handle it properly to continue growing.
• Prepare an Estate Plan: This comprehensive document establishes what happens with your financial assets and designated family members. Assemble a team of an estate planning attorney, a financial professional, and a tax advisor to create an estate plan that includes adding new family members over the years.
• Select Beneficiaries: You must choose beneficiaries for all your financial accounts and assets, including bank accounts, insurance policies, investment accounts, and retirement accounts. Selecting beneficiaries for everything prevents your accounts from going into probate, which will advance how soon your family can benefit from your financial benefits after your passing.
• Self-Canceling Installment Note (SCIN): A SCIN allows you to securely transfer business interests, real estate, and other assets while optimizing estate, gift, and income taxes.

Ready to turn your finances around and plan for the future? Check out our free ebook, 6 Money Planning Tips For Your Senior Living!

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