How to Build Generational Wealth - 5 WaysBuilding generational wealth involves more than just a fantastic life insurance plan and some money in the bank.
Generational wealth includes secure assets that your children can pass down to their children. What kind of assets are they, and how do you build this up so you have something to leave them?
The Importance of Generational Wealth
What is generational wealth? If you can’t define it, don’t worry. This is one of the most commonly misunderstood financial terms out there.Generational wealth is also called legacy wealth or even family wealth. This can include assets that continue to grow, like stocks or buildings. It can also be a business or even a combination of all of these.
It is any kind of financial gain that is passed down from one generation to another.
Why is generational wealth important? It gives you the chance to help your children (and their children) enjoy a little success with your help, even if you are gone.
It also gives your wealth a second life. Your family has the opportunity to help it grow into a lasting legacy that you started. It’s a tremendous honor and a way to make this world a better place for your family.
How to Build Generational Wealth
There are five reliable ways to build generational wealth. When you follow these tips, they will help you create a legacy that can last and grow from one generation to the next.
Invest in Real Estate
Real estate is one of the soundest ways to pass on generational wealth.
It has the potential to provide a reliable cash flow if you own an apartment building or another piece of real estate that you can rent out.
Some people get into real estate in a small way - buying a house for their children while they are in college. That home can then be passed down to them so they can earn the cash flow from the rental, too.
Others build on real estate wealth, buying and selling until they own valuable assets.
No matter which option you choose, real estate can be a solid choice.
Create a Business
Starting and building up a business is another way to pass down generational wealth. As the business grows, you will be able to pass all the assets and income to your children.
The good news is that you have statistics on your side. According to the Family Business Center, family businesses account for 64% of the U.S. gross domestic product, and more than 30% of these businesses survive to the second generation.
Even if your children or grandchildren aren’t interested in being involved in the family business, it still has the potential to give them employment experience and financial benefits.
Decreasing debt is one of the best ways to build generational wealth. All debt does is decrease the value of assets that you earned through your hard work.
Do everything you can to get out of debt. Set up a budget and pay off smaller debts, then work your way up to the largest ones.
Whether you pay off the debt with the highest interest first or the ones with the smallest balances, as long as you are paying them off, it will benefit your family.
Create a Financial Portfolio With Stocks and Bonds
Investing in the stock market is another way to build up the type of financial legacy that will last. The best types of stocks will grow with compound interest giving you (and your family) a wonderful return on your investment.
If this is your first time buying stocks, you should speak with a financial consultant who will help you make choices that aren’t risky.
It’s also important to diversify, meaning you invest in a variety of different types of stocks. This way, if one doesn’t grow as hoped, the others will make up for it.
Consult an Expert
The best way to leave a legacy for your family is to make a personalized financial plan with a financial advisor.
They will help you create a plan that is tailored to your lifestyle and budget. With specific goals and milestones, they will not just help you achieve your financial dreams but keep that dream alive.
The world of finance is a confusing place. It is extremely important that you speak with someone that knows how to navigate it.
Safe Methods to Pass the Legacy Down
After you work hard to build up wealth that you want to leave to your family, how do you make sure they will get it? There are a variety of legal ways to securely manage your wealth and pass it down to your family.
A will is a basic way to outline exactly what is to be done with your wealth. Work directly with a wealth management attorney so that they can make sure that your will is specific.
If you successfully build generational wealth, then you will need to set up a trust. This is a legal way to appoint trustees - the individuals who will manage your wealth after you pass.
Within a trust, you can also set specific instructions on how it is to be used. For example, you restrict the assets from being used for gambling purposes.
An estate is a legal way to group all of your assets into one place. You have control over who can manage it after your death.
Contact a Financial Advisor Today
When you are ready to learn about building generational wealth, contact Power Forward Group. We will look at your current efforts and suggest ways to increase your wealth so that you leave behind a legacy for your family.
With the correct strategies in place, your wealth can last well beyond your children. It can help ensure future generations do not have to endure the struggle of past generations.