Building Generational Wealth

The goal of generational wealth is to allow you to enjoy the fruits of your labor in your lifetime and to help your heirs reap benefits as well by enabling them to enjoy a financially secure lifestyle after you’re gone. Generational wealth can pave the way for enhanced educational and financial opportunities for your children, opportunities that in turn build their earning potential and create a better foundation for their own kids.

Where to start

One important way that people transmit wealth is through homeownership. You should also model the building blocks of healthy personal finance:

Prioritize savings. As the Robert Kiyosaki adage says: It’s not how much you make, it’s how much you keep.
Create a budget. This will help you control your spending, which in turn allows you to have funds to save.
Reserve some of the savings for emergencies, creating an emergency account.
Set up an automatic payment to yourself each month. Consider putting money in certificates of deposit for a guaranteed return.
Involve your kids in money conversations. It’s important to discuss financial basics with your children from a young age — maybe through games, by giving them an allowance, or even by investing a small amount with them then tracking wins and losses together.
Invest in the stock market. Diversify, balancing risk with growth potential. You might start by investing in index funds designed to mimic the performance of major market indexes such as the S&P 500. Think of it as a long-term strategy and ride out downturns.
Invest in real estate. If you’re not ready to explore various property types to own, you can look into real estate investment trusts.

Consider your descendants

Building wealth for yourself is only a step away from creating generational wealth. Make sure your assets are protected so that they remain available to future generations:

Create an estate plan. It’s important to have your wishes documented legally so that your wealth goes where you want it to go. Start with a will, but as your finances increase in complexity, set up a trust. Be sure to keep your affairs in order. Let your family know your plans and how to access your documents.
Get professional advice. As assets grow and become more complex, working with financial experts and estate attorneys is a smart move.
Maximize tax benefits. Tax-efficient investing strategies and vehicles can help you retain a greater share of your returns. Consider investment vehicles such as individual retirement accounts and 401(k) plans.
Avoid debt and financial pitfalls. Living within your means and building a healthy emergency fund are the best ways to avoid high-interest debt such as credit card balances. Use any windfall money — for example, from tax returns or gifts — to pay off large debts.

Building generational wealth has so many benefits, including the following: You’ll enjoy peace of mind, share your knowledge and insights with your heirs, and know that you’re giving your children and grandchildren more options in life.