How to Build Generational Wealth
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You may have heard the terms “generational wealth” or “family wealth” and thought, “that sounds like something I should start doing”. But with financial obligations like paying off debt, saving money, and achieving other financial goals, the thought of generational wealth may have gotten lost in the mix.
In order to understand how to build generational wealth, we have to understand what it means. Generational wealth is the act of wealth and assets being passed down from one generation to the next within a family. It is accumulated wealth that is transmitted through inheritance, investments, businesses, and other forms of financial resources.
Approximately 70% of wealthy families lose their wealth by the next generation, with 90% losing it the generation after that. Here’s how to build generational wealth and how to keep it.
4 Ways to Build Generational Wealth
Invest in real estate: Investing in real estate is a smart long term way to build wealth. This can seem intimidating but if you continue to buy properties one at a time throughout your life, your real estate portfolio can grow quite quickly and easily.
Invest in your child’s education: Education provides an opportunity for your children to support themselves. Anyone with an education will always have that education, this is an irreplaceable asset. With a college degree, many pursue higher-paying jobs that can help them navigate their own finances.
Pay off debt: Paying off debt is a key to building generational wealth because when you don’t owe money, you can build up your assets much faster. Pay off your debt as soon as possible so future generations can focus on building assets.
Create multiple streams of income: A great way to build wealth is to have multiple streams of income. One of the best forms of income to focus on is passive income. Passive income is when you earn from your assets after the initial set-up without much time.
4 Ways to Keep Generational Wealth
Estate Planning: Creating a comprehensive estate plan that includes wills, trusts, and other legal documents to clearly outline how the assets should be distributed among beneficiaries, secures an easy transition. This can help minimize estate taxes and ensure the smooth transfer of wealth.
Trusts: Setting up trusts can protect assets from potential creditors, lawsuits, and excessive taxes. Trusts also provide specific instructions for how the assets should be managed and distributed over time, even after the original owner's passing.
Name beneficiaries for your accounts: The simplest way to ensure your assets are passed easily to the next generation is to name beneficiaries. If you were to pass away, beneficiaries are able to receive the assets smoothly.
Financial Education: Educating the next generation about financial literacy and how to be responsible with money, provides them with the necessary knowledge and skills that can help them make informed decisions about preserving and growing the family's wealth.
Summary
The idea of generational wealth is based on the notion that a family's financial well-being can be sustained and improved over multiple generations through careful financial planning, asset management, and the preservation of wealth. This accumulated wealth can provide opportunities for education, access to better healthcare, business ventures, and other advantages. If you would like to free up more time and focus on growing your small business and family wealth, contact 4Wealth Financial Group LLC to learn more!
