5 Ways to Build Generational Wealth
Audrey Woodley
Has anything of monetary value been passed down to you or your family? It can be anything that holds value over time such as a trust fund, a family business, real estate, or just straight-up cash?
See, too many people want wealth (or have access to it through inheritance) but neglect building generational wealth. With building generational wealth, your family (and future inheritors) can transform that wealth into building income-generating investments.
Generational wealth is defined as any monetary asset that is passed down from generation to generation. This can be businesses, stock investments, land ownership, vintage jewelry, even famous secret recipes that have won awards.
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Having generational wealth puts you at an advantage when it comes to your finances over someone who doesn’t have generational wealth. Your children may never have to take out school loans, your family members may always have land they can build a home at or a lump sum of cash in a trust fund they can use to build passionate businesses.
Building generational wealth isn’t difficult if you know how to start. If you weren’t gifted with generational wealth, it doesn’t mean it can’t start with you! In this blog post, I will go into 5 ways you can start building future generational wealth for your family line.
Building Generational Wealth through Real Estate
Real Estate is defined as a class of "real property" which includes land, and anything permanently attached to it, whether natural or man-made. Now it’s important to note that not all real estate is equal because there are 5 main categories of real estate. It’s important to familiarize yourself with the types of real estate to choose one you can see yourself building generational wealth in for your family.
The 5 categories of real estate are:
Special Use- A good example of special use real estate is anything that is used for public use. Some examples include; schools, churches, libraries, and parks
Raw Land- A type of real estate that can be vacant lands, undeveloped properties, or agricultural lands like farms or ranches
Commercial- This real estate is mostly used for business purposes. Think of gas stations, apartment complexes, restaurants, convenient stores, offices, hotels, and more.
Residential- This type of real estate is the most common to acquire which is a home. Residential real estate can be condos, townhomes, cottages, single-family homes, mansions or duplexes
Industrial – Are real estate properties used for construction, manufacturing, production, distribution, storage, and research and development. A few examples would be warehouses or factories.
Real estate is a critical driver of economic growth and so many people benefit from real estate financially, regardless of generational wealth. To get started with real estate investing, check out these resources below.
2. Building Generational Wealth Through Building a Business
Another way to start building generational wealth is to start and build your own business that can be passed down your family line. You see this type of generational wealth a lot in certain industries like
Family restaurants
Family Mechanics
Family Law Firms
Family Home Service Providers
And many more. Here’s a fun fact. Did you know that more than 30% of family-owned businesses transition to the second generation? This means that your children may never have to be in debt if you keep your business growing successfully.
Keep in mind, these family businesses that are successful from generation to generation is because the interest is built from a young child. Most children can recall growing up helping out with their parents or grandparent’s businesses after school or over the weekends. They learned the business pretty young and if they were interested in the family business when older, they’d be more successful running it.
However, never force a family member to take over the business. The intent to thrive in a family business has to be driven by passion, not force!
3. Investing to build Generational Wealth
The secret to wealth creation is patience and perseverance. It’s playing the long term game but it’s better to start now than never. On average, the stock market gives a return of 9%. If you compound that rate by just investing $2800 every year, you can become a millionaire in 40 years.
Now, realistically, you may not want to wait 40 years to become a millionaire. However, there are ways to start investing now that can help you start building generational wealth for your family.
You may have heard that the rich stay rich because they invest. This is somewhat true. Investing in stocks will do more for your money sitting in a checking account right now. One misconception is that you need around 100,000K to start investing, and that’s simply not true.
Here are a few ways to start investing as a beginner to start building general wealth
The Robinhood app – you get one free stock just for signing up and it’s a great way to get your feet wet with investing
Enroll in a 401k with your employer
Put your money in a low investment mutual fund
4. Opting into Life-Insurance to build Generational Wealth
Having life insurance can be a useful financial tool to safeguard your family’s financial future. God forbid if you were to pass suddenly and not have anything of value to leave your children. It’s a type of generational wealth that you personally may never see come to light, but it will certainly protect your loved ones in any unseen problems or tragedies.
I recommend doing some research on the right life-insurance for you because different companies offer different options. If you want to learn more about choosing the best life insurance for you, here is a valuable course by Clever Girl Finance that will help!
5. Teach financial education to your children
This is the most important rule of building generational wealth, having your children understand the basics. Sadly, most public-school institutions don’t teach you how to manage your finances in a way where you can watch your money grow over time.
If many more people knew that you can start building generational wealth for your child once they were born and by the time they were 18, having almost $100K to their name would really make an impact on the economy.
Also, if you are building generational wealth for your children and your grandchildren, it’s important to pass down the knowledge on how to transform that generational wealth into income-generating investments that will only yield more generational wealth down the line.
How are you going to start building generational wealth today?
I’d love to know what you learned about building generational wealth while reading this blog post. Have you already got a head start or are you still deciding how exactly you want to start building your wealth? Know any more ideas on how to quickly start building generational wealth? Let us know in the comments below!
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