Your finances are a combination of your current income, investments, and expenses and how those figures contribute to your future wealth. Terms like generational wealth are important, but thinking about your financial future can be difficult when today’s bills come due.
However, planning for you and your family’s financial future can be simple and gratifying. The guide below outlines what generational wealth is, how to plan for it now, and how to plan to build it long-term—because the best way to put yourself in good financial standing is to increase your knowledge.
The meaning of generational wealth
Generational wealth may sound like an aristocratic term, but it’s not quite as exclusive as it appears on the surface. The terms rich and wealthy are easily confused in the modern lexicon. It’s important to understand that rich means someone with a large amount of cash or expensive assets on hand. A wealthy person may not have the same cash reserve, but they have sustainable financial assets. In other words, a rich person is likely only temporarily financially secure, while a wealthy person will likely be financially secure long-term.
Take note of the resources below you can put into action now with the help of a financial advisor. These short-term and long-term steps are the building blocks for the generational wealth your loved ones can reap the benefits of for years to come.
Investments like stocks and real estate are long-term in their return, but they don’t take long-term savings to start. To focus on building wealth with your investments, it’s important to enlist the help of a trusted financial advisor who can guide you through the processes and point you in a direction you may not have considered before.
The stock market can be unpredictable, but there are a few general guidelines to investing that can help you grow money over time. Look at multiple reputable stock lists for long-term investments, and decide what you feel is an appropriate amount to put in the market for your budget. Long-term growth stocks can help you secure more money to leave for your loved ones if you sell them years from now. However, there is no guarantee that you will see a return. There is always a possibility of loss in the stock market, so it’s common practice to maintain a diversified portfolio of other investments to better your odds.
Real estate is another investment that can be unpredictable, but is a bit steadier than the stock market tends to be. A lot of people talk about investing in real estate, but what does that look like for the average American? Well, there are a few avenues to discuss with a financial advisor and real estate agent. You can buy and flip homes to resell, become a landlord, put money into a publicly traded real estate investment trust (REIT), or, with a lot of research, buy raw land to resell.
There are some intangible investments, such as education, which you can’t necessarily see monetary growth in. However, these investments are equally important to consider. By investing in your child or grandchild’s education, you are equipping them with the knowledge they need to achieve financial independence sooner in life. Your children and grandchildren can use their education to secure their dream career and pass on wealth to the generations to come.
Put in motion documentation and savings accounts that will help your loved ones when you’re gone. Legal documents like a last will and testament can help ensure your assets are directed to the right people and aren’t seized by the wrong people or entities. Name your beneficiaries on your insurance policies, and make sure you update these yearly.
Teach your family about finance
Beyond the classroom, it’s important to teach your loved ones about personal finance. Take the time to help your children develop solid budgeting habits early on in life. By doing so, you can introduce them to the concept of financial responsibility, and they can become more comfortable and secure in their relationship with money. For inspiration, read this blog about effective ways to teach children about money.
Despite how it appears, it’s not impossible to grow generational wealth. If you work with a financial advisor and practice good money management, you’ll be on the path to financial security for your loved ones.