Building wealth is a task that can take a lifetime, and one person’s idea of what it means to have succeeded in this endeavor may not be the same as another’s. For many, being able to pass wealth on to their children, or other beneficiaries, is deemed to be the ultimate goal of wealth building. In order to succeed in doing this, you will need to work to build generational wealth that will last far beyond your own lifetime. Here are some of the many viable strategies you should keep in mind when envisioning how to accomplish your goals for passing your wealth on.
What Does “Generational Wealth” Mean?
Generational wealth is a term that describes an accumulation of money and assets that move on, past one person’s lifetime, to the next designated person or persons. Usually, that wealth is passed on to another family member, hence the use of the word “generational” to describe this process. For example, an inheritance counts as generational wealth, because it was built up by one generation before being passed on for the next family generation to use.
Generational wealth is not something that everyone has had the privilege of experiencing; those who are the first in their families to truly build wealth of their own understand how powerful this tool could be when starting out. If you would like to strategize about building wealth that will last beyond your own lifetime and be passed down to your heirs or loved ones, here are some options to consider.
How to Build Generational Wealth: The Options
Building generational wealth is not a singular path that everyone must take. Instead, you have a wide variety of options that can help you accumulate wealth that you can then pass on in many forms.
Consider the following:
Physical & Investable Assets
One of the most common ways to offer the next generation a slice of your wealth while still being able to use its value yourself is via physical assets. These could be items like a home or business. You can enjoy living in the home yourself, but after you pass away, that home can be given to your beneficiaries. Additionally, your real estate investments could generate passive income that can facilitate further wealth building.
If you already have significant cash flow, you may even choose to purchase a business to manage or hire others to manage. Your financial plan includes more assets for later use.
Of course, one of the single most powerful ways to impact someone’s life is simply to give them money, which they can use however they wish. Many people will choose to maintain a cash balance that they intend to pass on. You can do this in a high-yield savings account, or you could even invest in cash like investments for stability of your capital. The options are highly varied.
Invest in the next generation
Giving wealth to the next generation does not necessarily mean that you need to hand them something tangible, like money or a house. Consider paying for their college education, pay down unexpected medical expenses or teaching them active financial planning for their own lives. These tools can equip them with the knowledge they need to avoid simple mistakes that set them back unnecessarily.
No one lives forever, and selecting the right life insurance policy is critical for building generational wealth. Ensure that the policy you choose will pay out to your intended beneficiaries, and consider paying more now for a higher payout later. Once your time is over, the next generation will receive a substantial sum that they can use to tackle their hardest-hitting pains at the time-or to invest for their own next generation.
Passive income via physical assets
Building passive income is one of the most effective ways to balloon your generational wealth. If you have income streams that are supplying money passively (that is, without you actively working), you can use this income to funnel money directly into assets and accounts for the next generation. Ideally, you can also set up the means to divert this passive income directly to your intended beneficiaries after you pass, so that they too can enjoy money coming in without active work.
Managing Your Own Finances First
One of the most important things to remember about building generational wealth is that you matter too. Be sure to manage your own pain points first so that your situation is secure. If you are struggling, your ability to save for the next generation will suffer too.
Work with a Professional to Plan for the Next Generation
Determining the best strategy for building generational wealth can seem challenging when there are so many options. The professionals at Inflection Advisors would be happy to sit down with you and learn about your unique situation and goals to offer guidance on the most effective ways for you to accomplish your vision. Reach out to learn more or to schedule an appointment to get started.