n89) How To Build Generational Wealth

 How To Build Generational Wealth

You may have heard the term "generational wealth" and thought, "Wow, that sounds important." But at the same time, you might have pushed it to the back of your mind because you have more pressing issues.

For instance, you might be focused on getting out of debt, saving money, or pursuing other financial goals. It may be that creating generational wealth is not on your immediate priority list while you tackle your current finances. But with that being said, you can still build it into your long-term financial goals.

Not quite sure what the meaning of generational wealth is? Not to worry! In this article, you'll learn exactly what it is and also just how to build generational wealth for your family.

So, what is generational wealth?

Generational wealth means wealth that is passed down from one generation to the next. You may also hear this called family wealth or legacy wealth.

If you are able to leave something behind for your children or grandchildren (e.g. an inheritance), then you are contributing to the growth of wealth in your family.

Of course, you may leave many things such as good memories and healthy genetics behind for your family. However, I'm specifically referring to the financial resources that you are able to leave behind.

Wealth takes many forms, such as real estate assets, investments, or a financial education to carry forward into the future.

It's also important to note that there isn't a specific amount of money that is considered "generational wealth". Rather, it's any wealth that you give to the next generations in your family. This is what is defined as the "generational wealth meaning".

Why is generational wealth important?

If you are starting from scratch with your finances or starting out with a large debt burden, then you should realize the importance of passing down wealth to your family.

What if your parents had the ability to fund your college education? That single action could have a tremendous effect on your financial future. Instead of playing catch-up to pay down your student loan debt, you could be saving for your first home or your future retirement.

So how should you start to save for generational wealth? Here are some of the best ways to start preparing to leave a legacy of wealth behind for your children and grandchildren.

1: Invest in the stock market

The stock market is a fantastic way to create wealth over the long term. If you want to begin building generational wealth, then it is a great option. It has the potential to continue growing for decades.

Investing in the stock market might sound scary if you’ve never tried it. However, it is an important way for building generational wealth in your lifetime and beyond.

2: Invest in real estate

Real estate is another major way to build wealth in the long term. With the potential for steady cash flows in addition to increasing values over time, real estate can be a reliable path to wealth.

The idea of building a real estate empire can be intimidating. But it doesn’t have to be! You may have already waded into the world of real estate by getting a mortgage to purchase your first home.

3: Build a business to pass down

Family businesses have the potential for great success—more than 30% of family-owned businesses transition to the next generation. Imagine being able to hand over the keys to a successful business to your children.

4: Take advantage of life insurance

Life insurance provides the opportunity to protect your family in the event of your untimely death. Without your income, your children might be forced into less-than-ideal financial circumstances.

If you make the effort to invest in a life insurance policy now, then it could prevent financial tragedy for your children. Plus, they will already have enough to cope with if they lose you.

5: Invest in your child’s education

In many cases, education can provide a way for your children to support themselves. With a college degree, many frequently have the opportunity to pursue high-paying jobs that can help them navigate their own finances.

Anyone with an education will always have that education. Although other things in life can come and go, no one can take away your education. If you have the ability to help your children make it through college without any debt, then you are helping to set them up for a brighter financial future than many of their peers.

6: Teach your children about personal finance

Since you are interested in passing on family wealth, then you likely have a fairly good understanding of personal finance. Make it a priority to pass this knowledge down to your kids. It will be the best way to build and protect wealth.

There are many ways to broach the topic of money with your kids. You can buy children’s books about money, teach them through games, or show them by allowing them to listen as you talk through financial decisions.

7: Create multiple streams of income

When it comes to how to build generational wealth, creating multiple streams of income is a smart way to go.

There are a variety of income streams, but one of the best is known as passive income. Active income is when you trade time for money, such as a job or side gig.

Passive income is when you earn from your assets after the initial set-up without much time. For instance, rental properties, book royalties, peer-to-peer lending, etc. So you do have to put in the work upfront, but once the initial foundation is laid, you continue to earn from your efforts.

8: Pay yourself first

Saving money for the future is key when it comes to how to create generational wealth. The easiest way to save more money is to pay yourself first. For instance, as soon as you get your paycheck, you deposit money into your savings and investments before anything else.

9: Give gifts to your family

A great way to pass on an inheritance, wealth, and also family heirlooms is by giving gifts to your family members. There are many ways to do this.

For example, you might buy your kid's or grandkid's first house. Another idea is to give appreciating assets as gifts, such as artwork or jewelry. These are both heirlooms and wealth-building opportunities.

10: Pay off debt

Paying off debt is part of creating generational wealth because when you don't owe money, you can build up your assets much faster.

Pay off debt as soon as possible, and that way the next generations can maintain and add to the wealth that you've created. Be sure to make a plan to pay off credit cards, loans, and medical bills as quickly as you can so you can start creating more wealth for future generations.

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