Fifteen Powerful Tactics for Building and Preserving Intergenerational Wealth
Intergenerational wealth is the financial legacy that one generation leaves to the next. The concept is central to creating lasting financial stability and can be the key to breaking the cycle of poverty. Here are 15 of the most widely used strategies to create and preserve intergenerational wealth.
- The value of education as a wealth-building tool cannot be overstated. Higher education often leads to higher-earning jobs and the acquisition of skills that can be passed down.
- Financial literacy: Teach the younger generation about managing money, investing, and saving, to establish a strong financial foundation.
2. Minimize Debt
- Pay off debts promptly: Reducing debt helps to increase your net worth as well as reducing or completely avoiding unnecessary interest payments.
- Educate yourself and your family on the responsible use of credit. Help them understand that no debt is good debt, especially if you lose your job. It’s important to understand that debt should be used strategically and sparingly.
3. Prioritize Your Health
- Good health means fewer medical bills and more productivity, which can definitely impact wealth.
- Invest in a health insurance plan to protect against the financial impact of sudden health issues. Be sure to shop plans to locate the best possible health insurance for your situation.
- If possible, opt for jobs where your employer provides health care coverage.
- Creating intergenerational wealth starts with creating savings, contributing to a retirement account, or to any other vehicle that lets you put money aside for investing or other purposes.
- Emergency fund: It’s crucial to have funds set aside for unexpected expenses to avoid unnecessary debts or financial strain.
- Always strive to take advantage of compound interest. To determine how quick it will take your money to double, divide 72 by the compound interest rate (The Law of 71). AT four percent it would double every 18 years and at seven percent, it would double every 10 years.
5. Invest in Real Estate
- Homeownership: Owning a home is one way to create wealth that can be passed down through generations.
- Rental properties: These provide a consistent source of income and can appreciate over time, providing long-term wealth.
6. Establish a Business
- Start a family business: This can generate revenue and potentially become a legacy that continues providing income for generations. Teach the next generation the ropes early on to ensure smooth transition and continuity.
7. Financial Planning
- Whether it’s a tax or estate attorney, a CPA who can help you establish as LLC or S-Corp if you run a business and help you minimize your taxes, hire experts who have a proven record when it comes to devising strategies to accumulate and preserve wealth.
- Regularly review and adjust your financial plan: This allows you to adapt to changing circumstances and opportunities.
- At Real Estate Wealth for Women, we’re not fans of the stock market. One of the rules of wealth is to invest in what you like, know, and understand. Most people don’t understand the stock market and because of that, it’s not a great place to invest. On the other hand, homeownership and real estate are much better understood than almost any other type of investment.
- Diversification: Spread your investments across different asset types to reduce risk and increase potential returns. As you can see from our website, there are a wide variety of ways to invest in real estate. Choose one you like, learn it, and experiment to see if it’s a fit for you.
9. Life Insurance
- Purchase a highly specialized whole life insurance policy from a community-owned life insurance company. There are only four companies in the U.S. that provide these and most financial planners and insurance agents haven’t a clue what these are or how they work. Please see our content on “Stop borrowing and start lending” and in our “Investment Groups.” You’re looking or the content on “Be Your Own Banker.” The benefit can secure your family’s financial future in case of premature death but also provide a vehicle for doing other types of investments.
- Review and update your policies: Make sure your policies match your family’s evolving needs.
10. Retirement Accounts
- Contribute to retirement accounts: Both the initial contributions and the accrued interest can become a significant part of intergenerational wealth. If you are employed and your employer offers to match your contributions, this can help you build wealth much more quickly. Be sure to review these programs with your CPA, estate planner, and/or tax attorney.
- Start early and contribute consistently: The earlier you start, the more wealth you can accumulate if the account pays compound interest.
11. Estate Planning
- Write a will: Ensure your assets are distributed according to your wishes after death. Don’t procrastinate. The sooner you do this the better.
- Trusts: These can protect your wealth from taxes and creditors, while controlling how and when your assets are distributed. Please check with your CPA or other tax professional to set these up for you.
- Charitable giving: This can provide tax benefits and potentially boost the family’s standing in the community.
- Inculcate the culture of giving: It can help the younger generation appreciate the value of wealth and responsibility to society.
- Find a mentor to help you financially. Having a mentor in a desired field can provide invaluable guidance and opportunities.
- Networking: Building connections can lead to opportunities that may not otherwise have been available. Participating in Investment Groups is an excellent way to do this. We have several outside providers linked in on the Investment Group category on this website.
14. Asset Protection
- Legal tools: Use legal entities such as LLCs and trusts to protect your assets from lawsuits or creditors.
- Insurance: Various types of insurance can protect your assets from unexpected events.
15. Long-Term Vision
- Set long-term financial goals: Focusing on the future can help maintain motivation and direction in wealth creation.
- Teach your family and loved ones about the importance of patience and discipline. Wealth accumulation usually takes time and requires consistency.
The concept of intergenerational wealth goes beyond simply accumulating riches. It’s about providing the next generation with a solid foundation from which they can build their own wealth. These 15 strategies provide a framework for creating and nurturing a legacy of prosperity that can last generations. By planning wisely and considering these tips, you can ensure that your family’s financial future is secure for generations to come.