While the idea of generational wealth can sound far fetched or unattainable, especially if you’re just starting your financial journey—the truth is generational wealth can be saved for and part of your overall goals. 

How to build generational wealth?

So if you have children or are thinking about starting a family, you may have the desire to create generational wealth to set them up for more success or opportunities in their own lifetime. Here are 6 ways to grow generational wealth.

1. Invest in the stock market



Investing in the stock market is a great way to build wealth in your lifetime and hopefully pass it down to your next generation. Learn the risks and strategies of investing wisely in the stock market and find a trusted financial advisor who can guide you through it, while also understanding your overall goals and plans. An advisor can help you choose the right investment accounts, the right investments to go within those accounts, and find ways to build systems to review your accounts on a regular basis to ensure they’re working correctly.





2. Invest in real estate

Investing in real estate is another great way to build generational wealth. You can start by buying your first home and then add to your portfolio with additional real estate properties over time. You can invest in rental properties that pay you the rental income, which you can use for cash flow now and ultimately, pass down that cash flow to the next generation. You can even buy into commercial real estate through private investments or real estate investment trusts. Slowly and surely you can build a nice real estate portfolio to pass down to your children. Make sure to work with your attorney to set up the right legal and estate planning documents to ensure a smooth transition.


3. Pass down a business



If you’re a business owner you can also consider leaving your business to your family. If this is part of your plan, then make sure your children are aware of it (and also want to continue the family business). If so, then start training them on how to run the business and prepare them to take it over once you're gone. Again, make sure you have the right legal documents in place to carry out your wishes of keeping the business in the family. 


4. Life insurance



Life insurance is one of the only ways to provide tax-free income to your dependents in the form of a benefit upon your death. Because it can pass tax-free to your beneficiaries, it is a great way to provide generational wealth. Work with a trusted financial advisor who can walk you through the different life insurance types and help you understand all the details to make sure you get the right policies in place and have the correct legal documents in place. This is a way to provide your loved ones with an income stream to care for their lifestyle needs or help financially set them up for their future.


5. Financial education



Financial education is such a great way to leave a legacy and generational wealth behind. Many people who are born into wealth are not equipped with the right knowledge and education to manage the wealth in their lifetime because they were never taught how to manage and protect their wealth. In fact, it’s estimated that 70% of families lose their wealth in the second generation and 90% lose it in the third! You can decide to invest in your children’s financial education by enrolling them in online classes, taking them to workshops, or paying for a financial advisor to help them get set up after high school or college. The gift of financial literacy is priceless and can not only help pass generational wealth but also avoid many mistakes that can come from financial illiteracy. 


6. Get estate planning in place


With generational wealth, it is extremely important to get the right estate planning and legal documents in place so that all of your wishes of passing down your assets actually hold true. This includes making sure the beneficiaries are accurate on all of your accounts, making sure your living trust and other estate planning legal documents are up-to-date, and having conversations with family members and the people involved so that everybody is clear upon your wishes.

Building generational wealth through decades of hard work and financial education is an admirable goal and one that should be celebrated. If carefully planned and executed properly, you can use your generational wealth to leave a legacy. 

 

About Learn

Financial advice for real people, by real people. You shouldn't need a degree to understand your money. Join Head of Education, Brittney Castro and Altruist mentors as they break down financial tips and strategies in a real way to help you finally understand how to achieve your financial goals faster.