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Mar 7, 2024 · In simple terms, generational wealth refers to the accumulated assets and financial resources passed down from one generation to the next. This article explores the significance of generational wealth and why it is essential to consider its long-term implications.
- Overview
- The Importance of Building Generational Wealth
- The Challenges of Building Generational Wealth
- Build a Strong Financial Foundation
- Invest in Education
- Invest in Financial Markets
- Invest in Real Estate
- Create and Preserve Assets
- Maximize Tax Benefits
- Avoid Debt and Financial Pitfalls
Generational wealth refers to assets passed down from one generation to the next. Building generational wealth can provide long-term financial security and opportunities for your children, grandchildren, and beyond.
is about more than just financial resources, according to
, certified financial planner (CFP) and CEO of Kovar Wealth Management in Lufkin, Texas. “Its value extends beyond the monetary aspect—it’s also about imparting enduring family values and wisdom, creating a legacy that benefits and shapes the lives of future generations,” he says.
Learn more about why generational wealth is important, how to lay the foundations to build wealth for your family, and how to ensure that your legacy is passed on in the most efficient way.
Generational wealth refers to passing down assets from one generation to the next.
Before you can build generational wealth, start creating a strong financial foundation by prioritizing savings, growing an emergency fund, and thinking through future plans.
Achieving financial success takes a lot of hard work, sacrifice, and planning. Not only can it help you enjoy things in your lifetime, but it can also help your heirs reap the benefits of your legacy and enjoy a financially secure lifestyle after you’re gone.
Think of it as a wealth snowball. For example, generational wealth paves the way for enhanced educational opportunities and, consequently, greater earning potential for your kids, according to Kovar. And then they can continue building upon that foundation for their kids (your grandkids).
Building generational wealth is not an easy undertaking, but it’s especially challenging if you grow up in
or face systemic barriers. Unfortunately, that has been the experience of many marginalized groups in this country.
For instance, in 2019, the median wealth of White families was 6.5 times that of Black families, 5.5 times that of Hispanic families, and 2.7 times that of Asian and other families, according to the Congressional Budget Office.
Another key finding in the report: Black and Hispanic families each owned about 24 cents for every $1 of white family wealth, on average, as of the second quarter of 2023.
is the fact that Black Americans are less likely to own a home, which is one of the major ways that people pass on wealth. The underlying reason for this is, in part, systemic
discriminatory practices in home selling
Building generational wealth is as much about setting a strong example as it is about making the right financial decisions. You can model the building blocks of healthy personal finances to your family, which includes the following best practices.
“It’s not how much you make, but how much you keep. That’s the key to accumulate savings and wealth,” says Jason “JB” Beckett, founder of
in West Columbia, South Carolina.
Many people fall into the trap of saying they’ll save what’s left over at the end of the month but never end up getting around to it, or they spend beyond their means. A better approach is to create a budget to control your spending so that you have guaranteed funds available to save, and set up an
Here’s how to get started:
Pick a percentage or dollar amount that you are able to allocate toward savings goals after your expenses are covered.
Once you’ve made some progress on your emergency fund, you can allocate some of your
toward other big financial goals. A popular one is to save for your children’s education. If you’re aiming to build generational wealth, you can think of
for your kids as an investment in their future earning power.
That’s because degree attainment is directly correlated with an increase in lifetime earnings—in the millions, as a study by the Georgetown University Center on Education and the Workforce found. According to the study, someone with a high school diploma can expect to earn $1.3 million over a lifetime; a bachelor’s degree holder will earn $2.3 million; a master’s degree can lead to $2.7 million in lifetime earnings; and a professional degree holder can earn $3.6 million.
To build wealth in a meaningful way, the sooner you get started, the better. “Starting early and consistently saving, even in smaller amounts, can lead to significant growth over time, thanks to the power of
While investing in the stock market comes with some risk, if you
across stocks, bonds, and other assets, you can balance risk with growth potential. One popular strategy for beginners is to invest in
, which is a collection of many stocks designed to mimic the performance of major market indexes like the S&P 500.
Another popular investment avenue to explore is
, thanks to its potential rental income and
in property value. Plus, it’s a strong investment to pass on to your next of kin.
“Exploring various property types, from residential to commercial, can diversify your real estate
If you’re not ready for that level of investment or don’t want the commitment of running a property, Beckett suggests looking into
real estate investment trusts (REITs
is just step one in creating
wealth. The next part is making sure that your assets are protected so that they remain available to pass on to future generations. You also want your heirs to be able to retain as much of their inheritance (if relevant) as possible, which is why tax implications come into play.
To ensure your children are protected and set up in the best possible way financially, consider the following actions.
As your assets grow and become more complex, working with financial professionals and attorneys on
is the smart move. Some considerations include:
Creating a business that you can pass down
strategies and vehicles can help you retain a greater share of your returns. Some strategies include:
Traditional individual retirement accounts (IRAs)
, offering you an upfront tax break as you invest. You pay taxes when you withdraw your money in retirement.
when you withdraw, since contributions are made with after-tax dollars.
and enjoy tax-free growth. Then, if used for eligible medical expenses, money comes out tax-free, too.
to learn what strategies are best for you, and ultimately shield the most money from taxes as possible.
Living within your means and having a healthy emergency fund are the two best ways to avoid unnecessary, high-interest debt like high credit card balances. Those types of borrowing costs can prevent you from making progress on your savings and wealth-building goals.
If you do have some debt to contend with, prioritize paying your highest-interest accounts, while still maintaining your contributions to your emergency fund and retirement accounts (though it’s OK to scale back temporarily). Try to use any
May 17, 2024 · To build generational wealth, prioritize savings, build an emergency fund and develop an estate plan.
Sep 22, 2022 · Learn how to build wealth through investing from three financial advisors. Generational wealth is something future generations can benefit from, and it can start with you.
Jul 3, 2024 · Generational Wealth Management Review. Generational Wealth Management, registered in 2020, serves 5 state (s) with a licensed staff of 8 advisors. Generational Wealth Management manages $257.8 million and provides investment advisory services for 534 clients (1:67 advisor/client ratio).
- $257.8 million
- 1:67
- $482,701
Mar 14, 2024 · Learn how high school student Rachael Kim started building generational wealth for herself and her family.
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Aug 5, 2021 · For high-net-worth individuals, investing in real estate is one effective way to achieve portfolio diversity and grow wealth. BNY Mellon Wealth Management offers key tips for how to leverage...
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