By definition, generational wealth refers to any assets that are passed from one generation to the next. By embracing the next generation and actively involving them from a young age, families can give themselves the best opportunity to shift beyond wealth preservation into wealth growth and transformation. Learn how families can build the foundations of a lasting legacy of wealth with these tips from U.S. Money Reserve, America’s Gold Authority®.
What Is Generational Wealth?
Generational wealth, also known as family wealth or legacy wealth, involves passing financial assets from one generation to another. For instance, grandparents may pass their wealth down to their children or grandchildren.
Why is generational wealth important? Because it can set up your children or grandchildren for financial success long after you’re gone. If they responsibly handle that wealth, your children and grandchildren can help establish financial security for future generations.
How Do You Build Generational Wealth?
Several options are at your disposal to build generational wealth. Here are eight of them.
1. Purchase stock. Putting money into the stock market may help you create long-term wealth. “On average, the stock market gives a return of 9%. When compounded, investing just $2,800 every year can make you a millionaire in 40 years,” reports Global Banking & Finance Review.
2. Contribute to an employer-sponsored retirement plan. If your employer offers a 401(k) or another retirement vehicle, you may want to take advantage of it to give you a leg up on producing generational wealth.
3. Buy real estate. Becoming the owner of a home, a rental property, an office building, or another type of real estate may give you an edge in building generational wealth.
Forbes adds that “although real estate values can fluctuate from time to time, over the long haul, real estate has consistently appreciated over time from inflation and its intrinsic value. Investing in the class can help you generate wealth for not only yourself but future generations.”
4. Launch a business. From a flower shop to a software firm, a company that you own and operate can reap long-term dividends when it comes to amassing generational wealth.
5. Purchase life insurance. If you were to pass away suddenly, a life insurance policy might help cushion the financial blow felt by your survivors.
Term life insurance is one affordable option. “Isn’t it worth 30 bucks a month to pass a million down to someone, even if you don’t have children?” asks Lauryn Williams, a certified financial planner.
6. Stash some cash. This sounds like an obvious route toward generational wealth, but saving is easier said than done. About one fifth of Americans have just $1,000 to $5,000 in savings. Setting aside at least some of your money in savings can smooth the path toward generational wealth.
7. Buy precious metals. “Precious metals have been considered money and a storage of wealth for over 2,000 years,” Innovative Wealth Management explains.
Adding gold and silver to your portfolio may, among other things, diversify your holdings, help safeguard you against inflationary risks, and help protect you from volatility in other asset classes.
“Many Swiss vaults are lined with gold bullion from wealthy families who [view] gold as permanent storage of wealth,” Innovate Wealth Management adds.
8. Look into a self-directed IRA. A self-directed IRA enables you to put money into alternative assets, including precious metals, real estate, loans, and private debt. It’s an excellent vehicle for holding and managing many of the above assets!
How Do You Preserve Generational Wealth?
Once you’ve settled on a plan to create generational wealth, you must make moves to ensure that your wealth is preserved in both the short and long terms. Here are three ways to do it.
1. Teach your kids about finances. Educating your children about handling their personal finances can go a long way toward making sure your hard-earned assets make it from one generation to the next. Part of this equation can include education about precious metals and their role in a portfolio.
2. Be a good role model. Many children mirror what their parents do when it comes to personal finances. Therefore, it’s crucial that you demonstrate strong financial habits so that your kids follow suit. In a survey by T. Rowe Price, just 23% of American kids said their parents talk with them regularly about money.
3. Set up an estate plan. An estate plan, including a will, can dictate how you want your assets to be handled when you’re gone. This plan can help ensure that your wealth ends up in the intended hands.
“A will, powers of attorney, and naming beneficiaries on accounts can be a huge help. If you die without the proper documents, a probate court will determine how your estate is divided and take a cut of your total assets, leaving less for your family,” notes CNBC.
Generational wealth is built brick by brick. Some bricks are gold, and some are nuggets of knowledge. Contact U.S. Money Reserve for a free one-on-one consultation to learn how precious metals might benefit your generational wealth strategy.