Saving & Budgeting

Generational Wealth: How to Start Preparing for the Future

Learn how you can start building generational wealth to pass down to your future generations

Adult passing a key down to a child - generational wealth concept

We all dream of creating an empire that we can pass on to future generations, but creating wealth and financial stability is unfortunately not as easy as it sounds. We all wish we had an inheritance to rely on, but most people usually get through life working while hopefully saving enough for a comfortable retirement.

How is it that some people can accumulate wealth to pass on to future generations and others find this a monumentally difficult enterprise? How can we start preparing for the future and create our own generational wealth so that we can give our children and grandchildren an easier start in life?

What is Generational Wealth?

In simple terms, generational wealth is something of value that is passed from one generation within a family to the next. The assets that are often passed on as generational wealth include cash savings, real estate, stocks and bonds as well as any other investments such as antiques, art and other collectables. In most cases, generational wealth is passed on following the death of a senior member of the family, or the person that currently owns the assets. However, it is not uncommon to pass on some or all of these assets while the original owner is still alive.

In most cases, generational wealth forms part of a family trust in which parents can control how the wealth is distributed and ensure that an allowance is paid in instalments instead of handing over a lump sum.

How can Generational Wealth Benefit Your Future & Family?

Creating family wealth is of immense benefit for the immediate family and when it is properly maintained, it can also ensure an easier start in life for future generations. The cost of raising a family can be quite high and ensuring children have a good education is often out of reach for many people or they need to take out enormous debts for tuition, books, etc.

When wealth is passed down from one generation to the other, it can also be invested into new business enterprises, invested into more stocks and bonds, all to keep generating more wealth for the family. This means that new generations will have the money to send their children to private schools and universities, buy them homes and help them start their own businesses or include them in existing family ones.

In essence, by securing your own future by creating generational wealth, you are also ensuring your future generations will also have more opportunities to live well and possibly even create their own wealth to pass down.

How to Get Started Creating Your Own Generational Wealth

Real estate is often a great way to get started with a first investment because you can rent the property out and let the rents pay for all or most of the mortgage payments. Once you pay down a good portion of one investment property, you can move on to another one.

When you have enough money saved, it’s also a good idea to invest it into stocks and bonds that have a proven return. However, be wary of high returns as these tend to also be high risk.

At the end of the day, it may not be 100% possible for you to create generational wealth in your lifetime. However, you can always fall back on taking out a life insurance policy to ensure you leave something behind for your children to get started with.

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