December 13, 2023

Signs you’re building generational wealth and what to do if you’re not

Generational wealth doesn’t have to be unreachable if you invest thoughtfully and properly prepare your estate, whatever your income level.
What is generational wealth?
Generational wealth supports the welfare, health, and education of your family beyond your children’s generation. You will have achieved generational wealth when you have built up an asset base that can provide for your grandchildren and enable that generation and beyond to make decisions about their lives without having to be concerned about the costs of things.
Practical tips to help build generational wealth
If you breathe, you can achieve your financial goals. It’s not beyond you. Whether you have a GED or a Ph.D., it is possible to achieve financial literacy and independence if your money shows up in the right places. Enough attention is given to how people of colour or those who come from adverse financial situations can build wealth. Here are seven tips she thinks any family can use.
1. Examine your financial behaviour.
You can choose what side of the table to sit on. You can remain a consumer or become an owner and we recommend delaying immediate gratification for long-term strategy. Instead of purchasing a Netflix membership, we suggest looking to own stock in the company. Forgo those new Nike shoes for your son; instead, invest your dollars in Nike as a company. For those who want to invest and don’t want to seek a broker, we recommend trying user-friendly apps like Robinhood or E-Trade as stock purchasing tools.
2. Invest whatever you have.
We like to look at history for perspective on investing. A hundred dollars toward Apple across the last 20 years is worth over $10 million today. Most individuals don’t even know that an incremental amount of money could have possibly gotten into that level of wealth because that means $24,000 total contributed in $100 increments. Even if it’s $10 a month, it still accumulates. Give yourself a chance. At least allocate what you can for as long as you can into the right places, so you can grow it better.
When selecting companies to invest in, examine your day-to-day life. What did you purchase when you went grocery shopping? Do you have a Costco membership? What did you purchase at the Dollar General store? What companies you would still purchase from even if you lost your job? Start investing in those companies first.
3. You don’t necessarily need an attorney to draft your will.
Most people think you need to hire an estate attorney to draft your will, but that’s not necessarily true. Look for a general document online, fill in the appropriate blanks, and get it notarized. It then becomes a legal document. Alternatively, you can have a legal preparer help you. That will cost less than hiring an attorney. We also recommend checking with your place of employment to see if it provides will-drafting services. Passing on assets to your heirs and avoiding probate is an actionable way to build generational wealth.
4. Build a business you can pass on.
Creating an income stream for future generations makes owning a business a viable way to build generational wealth. While entrepreneurship can be intimidating, inexperience doesn’t need to be an insurmountable barrier. Seek mentorship from experienced businesspeople. Look for opportunities to fill gaps in your community. As a kid, if you found a way to make lemonade on the street corner, you’re able to be an entrepreneur.
5. Don’t forget to select beneficiaries on your accounts.
The topic of beneficiaries is personal. As a daughter of someone whose entire estate went into probate it can be hectic and stressful. Hence we’ve made it a career to save others from a similar fate whether they’re low or high income. Wherever your money is sitting, make certain you have selected a beneficiary. If you have a bank account, life insurance, a retirement account, anything that is a liquid asset, be certain you’ve assigned a beneficiary. We also advise people to let beneficiaries know they’ve been selected to prevent assets from going uncollected.
6. Start early to educate your children about wealth.
Discussing wealth management early is key. Have conversations with your children about financial literacy. A good way to start is to walk into your pantry and have children identify the various companies of the products on your shelves and have a dialogue about what it means to invest.
7. Take advantage of life insurance.
Life insurance can be a key partner in building generational wealth if used effectively. Life insurance allows for tax-free value to be passed by protecting those who are left behind from the loss of income.

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