Building a Lasting Financial Legacy: 9 Strategies for Generational Wealth Creation

Have you heard of the phrase “Generational Wealth?”

You may have thought about generational wealth if you’re actively building your financial independence and working to build your finances.

You might also have put this concept on hold until you achieved other financial goals, such as paying off debts, saving money or getting started with investments.

It doesn’t matter where you are on your journey. Understanding generational wealth is important and will help you build a financial legacy that your family can be proud of.

Table of Contents
What is Generational wealth?
How to build generational wealth
Why is it difficult to maintain generational wealth?
How to Leave a Money Legacy
What is Generational wealth?
The term “generational wealth” refers to any financial assets that families continue to pass on to their children and grandchildren. The assets may be cash, trusts, stocks, bonds, or entire businesses.

This is often referred to by the term “family wealth”, as it continues to pass down.

The goal is that each generation educates the next carefully so that the family wealth will pass from one generation to the next, with your money helping provide for your great-great-great-grandchildren!

Consider some of the well-known companies that have been able to pass on their wealth from generation to generation.

Generational wealth is not something that every family will achieve. It’s what you leave your children and grandchildren.

Why is it important to consider the generational wealth of a family?
It is important to consider your future plans and financial status in the context of generational wealth. This can help your children get an advantage in school, have less debt or even lead them to entrepreneurship, if you pass down a business.

By offering your children financial education and guidance, you can help them avoid making the same financial mistakes as you did and learn how to build wealth faster.

If you plan and think about the future from an early age, you can help your family achieve financial stability. You will also ensure that your kids don’t have to live in financial stress.

How much is the generational wealth?
How much is the generational wealth in money? If you’re looking for a number or range of numbers, you probably won’t get it. Your personal situation and cost of living will determine the answer.

This is the best way to answer this question:

When you accumulate enough assets and investments to pay for the expenses of your family and keep that amount for many years, this is what we call generational wealth. The goal is to make sure that your family’s wealth continues to grow over generations as assets and investments continue to compound.

If future generations are negligent, it is easy to destroy generational wealth. With some strategic planning and careful spending, this money can last for a lifetime.

How to build generational wealth
It isn’t easy to build generational wealth, especially when you are in debt and just beginning to achieve financial stability.

The sooner you start, the better for your personal finances and the more you can build legacy wealth.

You will want to make sure you have enough money in retirement to live comfortably for the rest of your life. Once you’ve created a plan, you can start focusing on assets and money that you will need beyond retirement.

Here are some tips for you to get started if you’re interested in creating generational wealth.

  1. Plan your strategy
    It is not easy to build and pass on generational wealth. In practice, this requires some planning and thought in advance. You can start by creating a plan with some goals if you wish to pass generational wealth on.

What percentage of your wealth do you wish to leave to the next generations?
What financial mistakes would you like to have avoided?
What would you have liked your parents to have taught you when you started managing money?
What assets are you going to invest in, or create, to build wealth?
You’ll also want to look at your finances.

You don’t need to spend a lot of money on a budget. However, knowing how much you are spending and what your assets and liabilities are will help you create a better plan.

  1. Repay debt
    You may want to pay off ALL of your high-interest debt before investing in assets that will appreciate.

Calculate the best method to repay your debt. You may want to create a budget to help you allocate money towards paying down your debts.

You can pay your debt in several ways. You can choose the Avalanche Method, which pays off the highest balance first. Or you can use the Snowball Method, whereby you pay off the lowest balance first.

  1. Investing in the stock exchange
    After paying off your high-interest debts, you can start building assets that you will pass to the next generations. Stock market investing is a great place to begin, as compound interest increases your return exponentially over time.

You can open an account at Acorns or Stash if you are new to investing, or if it sounds overwhelming. These platforms will guide you through the process and teach you the basics of investment.

Many platforms and investing experts recommend that you start with index funds. These funds offer low fees and are well-diversified. They’re the ideal place to put your money and forget about it.

Compound interest can make $5,000 invested every year into millions of dollars if you leave it for more than 30 years. That’s enough to provide a comfortable retirement for yourself and for your children.

  1. Invest in real estate
    Real estate investment is a great way to create wealth that will last for generations. Real estate can provide a steady cash flow for many generations if you pay off your mortgage and put in the effort to do so.

You’ve probably already had a taste for real estate if you have bought a house. Consider your options if you like to manage tenants and inspect properties.

Fundrise, Groundfloor or Diversyfund are all real estate crowdfunding platforms. These options are more recent and should complement investing in actual real estate.

  1. Invest in education
    College is an important investment for your child’s future in the United States. Regularly saving money in a 529 Plan is a great way to save for your child’s future education while protecting it from tax.

When your children are ready to go to college, this fund will allow them to get an education that nobody can take away from them.

College is not the only choice for your child. They may also want to go to an online college, start a small business, or learn a new trade.

Being prepared can help you avoid debts and give your children a financial head start when they begin their career.

  1. Consider life insurance
    If you are tragically injured and unable to support your family, life insurance can help.

You can ensure that your spouse and children will have money to help them in the future by taking out life insurance.

Compare the different life insurance options and do some research to find out which one is best for you and your loved ones.

Bestow is a great option that is affordable and provides the coverage you require. Click here to get a free Bestow quote.

  1. Consult a specialist
    Consult an expert to ensure you have the right financial instruments in place and that you’re passing wealth on the most efficient basis.

An expert can help you if you are passing on many assets that have complex terms and condition. They will make sure you have everything in order for the next generation to receive your wealth.

A professional will ensure that you are in the best position to achieve your goals, and that the future generation is aware of what to expect.

Experts include CPAs, financial advisors, lawyers, etc.

  1. Prioritize financial education
    Teach your children how to invest and manage their money to prepare them for the future. It also saves time by not having to make mistakes and learn on your own.

Even though minor financial mistakes can be a great way to learn, they can also set them back for several years. By becoming financially literate and educated early, they will have a better chance to start off with their money.

Not only will your children know how to handle the wealth that you leave them, they’ll also be able build their own and pass it on to the next generation.

Wouldn’t it be nice if your parents taught you more about personal finance?

Your children will learn the basics of money management and avoid making costly mistakes.

This is a wonderful way to build a strong family bond: Encourage them to participate in the family budget and teach them how they can use their pocket money. You could even start them off with a personal investment account. ).

  1. Create a business
    A successful business can create financial stability and pass on wealth to future generations.

Think of Walmart or Chick-Fil-A.

Your children may have other interests than the family business and not want to be involved. It’s okay. By starting a family business young, you can see if your children are interested and if it is something they enjoy.

You don’t have to start a franchise either. You could pass on a smaller business or an online one.

It’s fine if you don’t want to start a business. This is a great option for building generational wealth.

Why is it difficult to maintain generational wealth?
It’s not easy to build and pass on generational wealth.

It is important to first build wealth and ensure that it can be transferred to the next generation in a relatively smooth manner. Then, you should educate them on how to manage money and protect their wealth.

You are likely to be the first generation. You will have to work hard to support your family and to pass assets on to the next generations. You will learn the value of money, and how important it is to work for it.

If you don’t teach your children about money management, they may go on a spree of spending and will take your assets as granted.

The third generation is back at square one and the generational wealth has only lasted for one generation. This is not sustainable generational prosperity.

It’s important to teach your children the importance of money and financial literacy. Make this a priority in building your family wealth plan.

How to Leave a Money Legacy
You’ll also need to prepare in other ways to ensure that you can pass on wealth to future generations. You don’t want your family to fight over assets and money, as this happens far too often.

Being prepared legally in advance is the best way to prevent and hopefully avoid family problems. Consider these points.

Your will is a list of instructions for what to do with your assets after you die. Your will needs to be clear so that there are no misunderstandings about who gets what. Otherwise, you could end up in court over family disputes caused by unclear wills.

Estate plan
Your estate plan is a compilation of your assets and where they are located. It also includes how you can access them. Consult an expert to help you manage and transfer your wealth if you have a complex and large estate.

A trust is an instrument designed to transfer wealth in a certain way. You can put cash, real estate and other stocks in your trust, with instructions on how to use them.

You can, for example, create a trust that invests in the stock market and tell it only to be used for educational purposes.

You’ll also need to include beneficiaries on your trust: these are the people who manage and use your wealth. The trust will be passed on to the beneficiaries once you die, without any confusion.

Accounts held in custody
Custodial Accounts are investment accounts you manage on behalf of your child. They will become their full owner once they reach an age limit (usually 18, 21).

It is a great way to pass wealth on to your children before you die.

Money is often used to pay for college, a home purchase or other financial goals that your children might have.

Transferring good money values
You want to ensure that you pass on not only generational wealth but also good money values.

The next generation can make the most out of your wealth by educating them on the correct money values.

They’ll hopefully be able create their wealth and pass it on to the next generation.

Your kids will learn to value and respect the wealth that they receive if you teach them the lessons of money. This will set them up well for financial success in the future.