Generational wealth is often associated with assets that can be passed down from one generation to the next. But it is the tip of the iceberg.
Not having a plan and values attached to these that can be shared has caused many families to squander their inheritance. Only 30% of generational wealth survives into the next generation mainly because of a family having a clear mission statement and a plan. Understanding what generational wealth is and how you can achieve it is important. Here is what you need to know.
What is generational wealth?
Generational wealth comes in the form of finances and assets that can be passed down from one generation to the next. It is built over many years and can be enjoyed while you are still alive and when you have passed away. There are many ways in which people choose to create generational wealth such as:
Creating a financial portfolio over time that can be beneficial to your family is the first step, but it is equally important to have goals and plans that can help them take care of their inheritance for years to come.
A staggering 70% of wealthy families lose their wealth in the second generation. This percentage increased in the third generation with most families having lost it all. One of the reasons for this is the lack of sharing financial knowledge with their families. Thinking of values that can be passed down to ensure that your legacy is taken care of and what you have passed down is managed correctly is important.
What are the values you need to think of?
Financial values need to be communicated and demonstrated. Legacies live on through shared values. You may have a set plan to achieve your financial goals, but your money values are what anchor everything. Sharing your financial values with the people you intend to create generational wealth for can make sure that it is well taken care of, even when the going gets tough.
How can you create generational wealth?
Have goals. Every legacy starts with a goal. An idea of what you would hope to achieve by the time you die. Having goals will lead to taking steps on how to practically achieve your goals. Speaking to a financial planner or portfolio manager when it comes to investing in things that will help you reap the benefits is key.
Start planning. Having a plan is telling your money where to go. It is also a good way to track what is working and what needs to change. Think of long and short-term goals, be specific and realistic, especially when it comes to what happens to your assets after you die. Financial planning is essential for anyone looking to start and sustain a financial legacy.
Improve your financial education. Financial literacy is something that you will need to invest in as soon as you can. Understanding the value of money, interest rates and how investing works can lead to smarter financial decisions that will help you work smarter and not harder.
Pass on your knowledge. Teaching children the financial basics of handling money can help them when they are adults. Gradually bringing them into concepts such as saving, budgeting, investing, and managing debt are some of the ways you can teach children and family members to build financial wellness that is beneficial towards a lasting legacy. You can find practical tips on managing finances with your family from our financial blogs.
The power of starting small. When it comes to financial planning for a legacy that will outlast you, never underestimate the power of starting small. While saving is a great way to start, it is also key to understanding the power that investing has. Making the shift from saving to investing, even if it is in small amounts, can grow in the long run.
