You may have thought about generational wealth before but didn’t know where to start. Well, you aren’t alone; most people think about it even when they don’t understand what exactly it means to build generational wealth. You can learn about it and get started with it today.
This article will be your ultimate guide to everything you need to know about generational wealth. It will discuss everything you need to know, especially the definition and how to build it.
Read to the end to get all the insight you need about generational wealth.
Understanding Generational Wealth
So, what is generational wealth? Investopedia defines it as assets passed from one generation to another in a family. You’ve probably heard it referred to as old money and family wealth in the past. This is not an entirely new concept globally, as it has existed for thousands of years.
However, many people think of generational wealth as an inheritance. Yes, inheritance is part of generational wealth, but the whole concept entails more. It includes what you invest in your family, especially kids, to empower their future with wealth that will last for years.
Understanding how vital it is and how you can build it can help you make it. Also, you need to know how to pass the wealth accumulated to your kids. As said before, we’ll discuss all that and more in this blog post.
Why Is Generational Wealth Important?
Everyone can see the benefits of generational wealth. You may have seen its benefits by getting it or seeing the impact it has made on those who’ve had it. Here are its main advantages.
- It impacts mindsets - Most prosperous businesses in the world were started through risk-taking. It is easier to take significant risks when you have family wealth to rely on. You’ll be cautious with your investments when starting from scratch; thus, you avoid the risky yet most profitable ventures.
- It gives kids an upper hand - Your kids will also start somewhere with generational wealth. It is easier to build on what they have than starting afresh. They’ll be a few steps up the financial ladder, which will pave the way for more wealth that will benefit other generations.
- It helps people fulfill dreams - Almost everything is becoming expensive these days. Paying for education, general living, etc., isn’t easy, making it almost impossible to build wealth from scratch. That’s why building generational wealth for your family is vital. It helps make life affordable for upcoming generations.
Those are a few of the benefits generational wealth can bring. There’s no doubt that you need it to empower your kids for the future.
With the cost of living going up every day, there’s no better way to invest in your family. But you also need to know how to build generational wealth.
How to Build Generational Wealth
As mentioned before, starting to build generational wealth is an uphill task. Many people do not know where to start, and some know but are reluctant about it. However, some actionable steps and strategies can help anyone build generational wealth.
Create Multiple Sources of Income
The first way to create generational wealth is by having income sources. This means having a full-time job and a side hustle for generating passive income. A full-time job is, of course, the starting point for most people building wealth from scratch.
With a full-time job, you can get the capital to invest. Also, ensure you diversify as much as you can when investing your income. Gold has become a popular asset among those looking to diversify their investments. You can buy gold bars from dealers like Acre to get started.
Set Up a Trust
Another way to build generational wealth is by setting up a trust fund. One of the most significant benefits of a trust fund is having more control of your wealth. Besides, you get to avoid certain taxes when setting up a trust fund. This makes it easier to build your wealth with time.
It would be best if you didn’t wait to set up a trust fund after you’ve built wealth. It is among the first factors to consider when starting from scratch. But then, you can also add it as time goes on if you choose to. Growing your wealth through portfolios is easier when you have a trust fund.
Investing Your Money
Investments provide another excellent way to build generational wealth. Investing allows you to multiply and grow your money, making accumulating wealth easier. But then, you need to ensure that the money is in the most suitable investment; otherwise, you could end up losing it.
Various investment options exist today. All you need to do is evaluate your options and pick what you consider best from the list. You can put your money into real estate, bonds, stocks, mutual and exchange-traded funds, etc. Research about these investments before deciding.
Start a Business That You Can Pass Down
Starting a business can be a good option for building generational wealth. You can identify a business that you can build together with your family. This is a perfect option for families with an entrepreneurial disposition, but that’s not to say one cannot learn business skills.
Start small and even alone if you see this as a viable option. Let it grow, then bring your family on board when you need extra hands. Training your kids on how to run a business early can be a good idea. They’ll acquire skills that will help them expand the business.
Types of Passive income
Passive income is money earned without working the traditional way. Investments that bring in such income do not require too much attention. You only need to make the initial investment and wait for returns. Most of the wealthiest people globally rely on some form of passive income.
An excellent example of a passive income source is gold stocks and ETFs. You can profit from stocks so long as the gold mining company you choose makes profits. You do not need to buy or store gold to resell it to make profits. It earns you money with little to no effort from your end.
You can invest in physical gold for passive income. It is possible to purchase gold from Acre or any other dealer and store it with the dealer. Then be on the lookout for price changes then resell to the dealer. But gold prices are highly unpredictable because the price of gold relies on demand.
How to Pass on Generational Wealth
Passing on generational wealth may seem easy, but it is not. The beneficiaries of the wealth you’ve worked for so hard may not handle it well if you’re not careful. That’s why you should have a plan on how you’ll pass on the wealth to ensure it serves its purpose.
Here’s what to do to pass generational wealth efficiently;
- Create an estate plan with details of your exact wishes about handling your wealth.
- Set up custodial accounts for your kids when they are young until they are young adults capable of decision making.
- Name all the beneficiaries of your wealth to relieve your family of stress.
These strategies can make it easy to pass on your wealth to your family. They’ll help ensure those left behind do not get into conflict over your wealth. There’s no need to wait until your health deteriorates or you’re incapacitated. Early planning can help you avoid all the hassle.
Generational Wealth Transfers After Death
Most generational wealth passed down after death is through inheritance. Many people fear taxes when inheriting assets. However, the tax threshold for inheritance in the U.S is $11.7 million, higher than many people's inheritance.
Thus, only a few families get affected by these taxes. All you need for a smooth process is to plan for it earlier. As mentioned before, indicate who the beneficiaries will be to ensure your family subdivides the wealth efficiently. This will reduce the chances of bad blood between them.
But then, this won’t beat wealth transfer before death. It is better when you have everything in order while still alive. Catering for their education, planning their medical expenses, etc., are excellent ways to get it done earlier. You can also plan your estate and let your family know.
Generational wealth can help your kids and their generations have smooth lives. It is the best option to consider if you want to leave your kids with a leg up the financial ladder. But then, you need to ensure you follow the right tips and strategies for building and transferring wealth.
Also, ensure they know how to keep wealth for generations to come. This is through investing in their education, training them on personal finance, etc. That will ensure your investments like gold remain in safe hands.
You can contact Acre Gold for tips on gold bars as generational wealth.
Generational Wealth Definition | investopedia
What Is a Trust Fund & How Do They Work? | trustandwill