Creating Generational Wealth

By: Miguel Walker Asst. Vice President, Wealth Management Posted:

The topic of Generational wealth is fast becoming more than a buzz phrase, especially in this unpredictable economic climate. Generational wealth is simply the process involved in passing assets of monetary value from one generation to the next.

The key to Generational Wealth creation is financial discipline and understanding the fundamentals of money and wealth creation.

How should you start to invest for generational wealth? At Proven we will provide you with the pillars for generational wealth creation.

  • Invest in the stock market

 

The stock market easiest and most affordable way to build wealth over the long-term as historically the stock market returns outperform fixed income and other asset classes. In addition, stocks are easily transferable, and dividends earned can be reinvested thus creating more wealth.

  1. Invest in real estate

The inclusion of real estate in your portfolio is another way to build long-term wealth. Real estate provides the potential for steady cash flows from rental income and appreciation in value.

  1. Build a business to pass down

Family businesses have the potential for great success. More than 30% of family-owned businesses transition to the second generation, especially if your interests and abilities align with your children’s, then it is very possible they will want to take over the business you built. If they are unable or unwilling to take over the operations, then you could consider selling the business to fund generational wealth in another form.

  1. Take advantage of life insurance

A well-structured portfolio for generational wealth must include Life insurance, as it provides the opportunity to protect your family in the event you become incapacitated or meet an untimely death. Without an income, your children or estate might be forced into less than ideal financial circumstances.

 

  1.  Teach your children about personal finance

 

It is estimated that 70%of families lose their wealth in the second generation. And 90% lose it in the third. With statistics like that, it can seem pointless to save for a legacy of wealth. However, in many cases, the loss of generational wealth can be prevented through financial education. After all, it is easy to lose generational wealth if your kids have no personal finance knowledge.

 

How to pass on generational wealth

Once wealth is created there is a need to endure the smooth transition of wealth to the next generation.

Create an estate plan

  • An estate plan is essential to securing an easy transition of your assets. The larger your estate, the more complicated this plan will become. At any stage, I would recommend consulting an attorney about how to create your estate plan.

Write a will

  • A Will may be included in your estate plan but it is important to create one even if you don’t have an estate plan. The will should include your exact wishes. The more specific you can be about your plans for any assets you have accumulated, the better.