If you look at the world’s wealthiest people, you’ll find that many of them were born into wealthy families. But regardless of your background, you can make smart decisions today to build wealth, grow it, protect it, and pass it down to your loved ones for generations to come.
Generational wealth comprises financial assets, such as cash, property, investments, or anything with a monetary value, passed down from one generation to the next. However, intangibles such as financial education, spending habits, and values are an equally critical part of the equation.
Why Generational Wealth Is Important
Wealth provides you with more options in life. It grants you more freedom to live comfortably life without worrying about whether you can afford to pay the bills or pursue your passions. Although building generational wealth won’t prevent your kids from ever experiencing difficulties in life, it surely gives them more flexibility.
How to Build Generational Wealth
Here are a few ways to build generational wealth.
1. Create a Business to Pass Down
Approximately 30% of family-owned businesses make it to the second generation. Therefore, building a business to pass down to your loved ones is a great way to build generational wealth. To ensure continuity, encourage your children to take an interest in the company at a young age. That can encourage them to take over the business once you retire.
2. Invest in Your Child’s Education
Proper education plays a vital role in raising financially independent adults and building generational wealth. You can help your children create a path to financial independence by teaching them about personal finance. Start by having open conversations about money at home, covering topics such as budgeting, effective saving strategies, credit, and debt.
3. Invest in the Stock Market
Investing in the stock market creates an opportunity to build wealth passively. Many people who invest in the stock market with a long-term goal and diversify their portfolios often make significant money over time. Although investing in the stock market may be intimidating at first, you can start off with low-cost index funds to minimize your risk. These funds provide long-term growth opportunities at relatively low fees.
4. Invest in Real Estate
Investing in real estate can be a great way to build wealth. Most real estate properties appreciate with time while providing cash flow opportunities. It may be difficult to establish yourself as a real estate investor, but there are many ways to get started. For instance, you can purchase a commercial property and lease it to business owners. Alternatively, you can move out of your home, rent it out, and purchase another property. Many investors have employed both strategies to build their real estate portfolios one property at a time.
The Bottom Line
Overall, building generational wealth is not a walk in the park. Beyond the process of building generational wealth, you need to invest in education and proper estate planning to ensure the wealth you pass on lasts. When building wealth or passing it on to your heirs, always seek professional guidance from reputable accountants and estate planners.