The term “generational wealth” may sound exciting and rewarding; most people do not inherit it or necessarily build it in their lifetime. This is primarily since they do not strictly come as a top financial priority for most people.
Hence they are often sidelined to attend issues and commitments with greater values in life. We all have our list of financial obligations and goals that we want to achieve in life. If presented with the financial resources, we would naturally try to aid those commitments and fantasies rather than investing in generational wealth.
Such a thought-process is often the primary reason why people fail to build generational wealth in their lifetime.
What Is Wealth?
While we have already mentioned generational wealth quite a few times, in the beginning, it’s only fair to put it in simple words for greater understanding.
The wealth passed down from generation to generation through inheritance is commonly defined as generational wealth. It is also referred to as family or legacy wealth in different parts of the world.
If an individual can pass on wealth to his next-generation despite paying all his expenses and accumulating savings, then he’s investing in building generational wealth for his family. If we are talking in specifics, generational wealth can be anything- from real estate properties to bankrolled money or long term investment funds.
Importance of General Wealth
Those who don’t end up with generational wealth realise its importance far better than those who inherit them. It’s comparatively much harder for people who don’t have the secured financial cushion while embarking on their journey.
More often than not, they begin from ground zero or endure large debts. Had they been offered the generational wealth, they would have eased out their way through the crisis without getting back against the wall.
The presence of such resources could have salvaged several events in their life, which they had to face without having any financial aid for support.
Financial Illiteracy: Failure To Build Generational Wealth
It’s hard to deny that generational wealth seems extremely promising for the family in the future. But most people fail to build any in their lifetime. While there are plenty of reasons to substantiate the claim, the main reason is financial illiteracy.
Yes, it’s hard to save up money after providing all the bills and burdening loan to pay off debt. With smart financial management, one can make baby steps in the process.
1. Smart Investing Decisions
Those who are not aware of the financial market, fail to understand the true potential of investing in the stock market. You do not need to go all-in when investing in stocks. There are low-cost stocks available that do not big spending but promise a healthy return nonetheless.
Stock market investment is a fantastic way to kickstart building on generational wealth, where you do not need to spend a bomb or save up while compromising your lifestyle.
A foolish combination of insufficient knowledge and reluctance often deprives people of gaining money to pass on to the next generation.
2. Shrewd Real Estate Investment
Another route that the general public often disregards when building generational wealth is investing in real estate. The best thing about both stocks and real estate is that their value can soar, even after decades from now.
Coming back to real estate, investing in real estate can promise both short and long-term benefits when it comes to financing. It’s important to mention that investing in real estate doesn’t necessarily mean turning into a real estate mogul- that needs crates of cash.
Buying properties at regular intervals throughout one’s lifetime can eventually become a generational wealth, ready for passing over. It is a promising opportunity that is often missed by the masses.
3. Building A Business
Now this one is tricky but could be equally rewarding. We see plenty of businesses, both successful and unsuccessful ventures, around us every day. A general observation has reported that more than 30% of private companies make it to the next generation through an ownership transition.
While it’s not easy for everyone to establish a successful business overnight, those who already own one can most certainly think of the idea. If the business runner and their children share similar interest and acumen, there is an excellent chance that they can have a successful transition in between.
It is one way, a generational wealth handed over to the descendant. If the situation is not favourable, one can always sell off the business to fund generational wealth alternately.
4. Life Insurances
The most sensible option, investing in life insurance, can also be deemed a generational wealth, provided the compensation on the claim is sizable. Completely different from the rest, life insurances provide a financial guarantee in the wake of the insured person’s demise. It could be extremely beneficial if you are the breadwinner of your family, and there is no alternative route for income.
Life insurances come with various compensation plans, ranging from one-time claimable fund to recurring money pensions. In either case, you can protect your family, even in your absence. If the compensation money is sizable upon claiming, it can be considered a generational wealth as well, albeit in a different context than the rest in the list.
Most people think that building generational wealth in today’s financial climate is impossible unless you have hit the big time. On the contrary, it’s quite simple, provided you have the house and patience to invest in a slow-burning process.
Conclusion
When you start managing your finances, you realise upon checking your Experian credit report that it’s never that easy to save up generational wealth, especially in this era of the inflated economy. You must make efforts to save up small parts at a time, which would become a sizable wealth for your children in the long-term.
You must also educate your children about financial management from a tender age to understand the virtue of saving money and disciplined spending.