How to build generational wealth

Real wealth creation is achieved by owning revenue streams that are under your control. There are several approaches to accumulating and creating wealth; for example you can increase the income you already have, add a second source of income, invest in real estate, and be ruthless in deciding how to spend your hard earned money.

While you surely can trick someone into giving you their money, the easiest way to build wealth is by creating value for others, so instead of thinking ”Wealth Creation” you should think ”Value Creation”. That will give you the right mindset that you need to become really successful, because it shifts the focus from you to your customers.

Transforming Debt into Wealth

Debt is one of the biggest obstacles towards building wealth, and if you’re in debt you’ve got to eliminate it. Two steps to get out of debt fast is to get rid of your credit cards and put at least 10% of your take home income towards paying down your debt. Spending less than you earn is also a key prerequisite for debt elimination.

Work more. Save more. Spend less. Waste less. You’ll be out of debt and on your way to building real wealth in no time. ”

Wealth Creation Strategies

Here are two of the best opportunities to build wealth today, and anyone can get started in any of these businesses.

Information Publishing

A great way to become financially independent is through starting an information publishing business.

Instead of selling physical goods like flowers or clothing, as an information publisher you sell ideas, guidance, and expert advice. These ideas can be communicated and sold in various forms, like e-books, newsletters, reports, DVDs, membership sites, seminars etc., and once you’ve finished one information product, let’s say an e-book, it’s easy to repurpose that same content and sell it as a DVD, and a membership site, and a seminar.

The easiest way to get started with Information Publishing is if you’re an expert in something that people are interested in. Being an expert is relative, and by reading just a book or two on the subject you’ll probably know more than 95% of the population. If you’re not an expert in anything you can still build wealth in this industry, but the approach might need some adjustment

Information Publishing is a great wealth creation tool because with the internet your production cost is the lowest of any industry in the world. You can sell and deliver 100,000 e-books for the same price it costs to produce and deliver a single physical book. As you’re in the business of selling ideas and not selling books you can still charge a fairly high price for the e-book. Some people even charge more for the convenience of being able to download the book instantly.

Taking advantage of the growing ”knowledge economy” is one of the best and easiest approach to wealth building.

Real Estate

Wealth creation through real estate investing is still one of the best ways to become financially independent.

Using other peoples money is a great wealth creation strategy, something that many successful investors know. If you buy a $100,000 property with 20% of your own money and you borrow 80%, you only stand for 20% of the risk. If the property value goes down 20% you’ve lost all your money, but if it goes up 20% and you decide to sell you’ve just doubled your investment.

The real power of real estate investment is rent income. Imagine putting in 10% of your own money, for example $10,000 on a $100,000 property, and immediately start receiving several thousand dollars per month in rent. Of course you will have expenses and loan payments to cover, but it can still be a very profitable investment, especially when the loan has been paid off using other peoples money.

Early To Rise University is the go-to resource for high-performing executives and entrepreneurs looking to gain a slight-edge, become massively successful, and receive the step-by-step blueprints needed for making more money, getting more done, and still having time to enjoy the finer things in life.

If you use income from rent to pay $1000 a month on the mortgage you’ll have paid off the $80,000 mortgage in less than seven years, and after the mortgage is paid off you’ll not only be the full owner of a +$100,000 property, you’ll also have $1000 a month in passive income which used to go to paying down the mortgage but which now can be used as you please.

When it comes to real estate investing the choices are endless. Should you invest in mobile homes, apartment buildings, condos, single-family homes, office buildings, etc? Should you specialize in one type of building or diversify into several real estate types?

The fastest way to build wealth through real estate investing is by acquiring multi-family apartment houses. This is how really successful real estate investors build dynasties.

This is because they understand the concept of unit pricing. You can buy a single unit home for $100,000 and rent it out, or you can buy a 10-unit apartment building for $100,000 and rent it out. The difference in rent income is enormous.

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How to build generational wealth

Many people want to be wealthy because they imagine all of the things that they could buy with that money. Others want to be able to send their kids to college, travel the world, and retire comfortably.

How to build generational wealth

And while there’s nothing wrong with either of those motivators, there is another option.

It’s called generational wealth, and it allows you to create wealth that will not only sustain your family today but for generations to come.

What is generational wealth and why does it matter?

Generational wealth is wealth that your family passes down from one generation to the next. And whether you realize it or not, you’re probably already familiar with this concept.

Think of the wealthy families you see on TV and movies. The preceding generation worked hard and built the family fortune, and then passed it down to their children. Then the following generations continue to sustain and build on that wealth.

The concept of generational wealth isn’t just about making enough money to buy a nice house or fund your current lifestyle. It’s about setting up your children, grandchildren, and future generations for a better life.

It also requires that you adopt a very different mindset when it comes to making and spending money.

5 Ways to Build Generational Wealth

No matter what your current circumstances are, creating generational wealth is an option that’s available to everyone. Here are five ways you can start right away.

1. Get Your spending Under Control

The first place to start is by getting your spending under control. If you’re unable to manage your spending, then it won’t matter how much you earn. That’s why it’s important to learn how to spend wisely.

Start by tracking your spending every month and evaluating where you’re spending your money. It will likely be very eye-opening for you to see where that money is actually going.

Once you’ve tracked your spending for a full month, it’s time to come up with a budget, and look for any areas where you can cut your spending. By creating a zero-sum budget, you ensure that all of your money is assigned a purpose and isn’t being wasted throughout the month.

And if you don’t have one already, start saving up a six-month emergency fund. An emergency fund will keep you from getting off track when financial emergencies arise.

2. Create Multiple Streams of Income

If you’re only relying on one stream of income, it will be nearly impossible for you to create generational wealth. And if you unexpectedly lose that source of income, you’re going to be in a very vulnerable financial situation.

That’s why it’s important to create multiple streams of income. The first place to start is by maximizing your current source of income.

If you have a full-time job, take advantage of all the benefits offered to you by that job. These benefits could include things like health insurance, a 401(k), and any other investment options.

A popular option for many people is to start a side hustle to boost their monthly income. Starting a family-owned business, investing in real estate, and stock market investments that you can eventually pass on to your children is a great way to build generational wealth.

3. Diversify Your Investment Portfolio

Working hard at your job, side hustle, or business is going to be the most beneficial if you can put that money to work for you. Don’t see it as extra money you have to spend every month because that’s not the way to build wealth.

Investing is one of the best ways to build passive income streams that you don’t have to work for. Make sure to create a diversified portfolio by investing in things like real estate or the stock market.

4. Invest in Education

One of the best investments you can make is in continuing your education. Ongoing education will not only give you the tools you need to create more wealth, but it will also ensure that you manage it in the best way possible.

It’s also important to invest in the education of your children. For instance, a college degree will allow them to pursue higher-paying careers. At the very least, investing in your children’s education will give them the tools they need to be successful and take care of themselves down the road.

5. Teach Your Children Financial Responsibility

And finally, building generational wealth is not just about you. Even if you save responsibly and do everything right, it’s possible that later generations could squander this money.

That’s why it’s essential to teach your children about financial goals and responsibility from a very young age. Teach them where money comes from and about the principles of spending, saving, and giving.

And teach them how to work hard and earn their own money from a young age. If you have a family business, get them involved in it in some way right from the start.

By teaching them good financial habits, you’ll help them learn the skills they need to manage that money after you’re gone.

How to Pass on Generational Wealth

Building generational wealth is only the first step in this process. Once you’re on your way to achieving this, you need a plan for how you’ll pass this on to the next generation. Here are three steps to help you get started.

1. Come up With a Plan

Once you’ve built your estate, you need to come up with a plan for how it will be managed. And the more complex your estate is, the more complex the plan will be. That’s why it’s a good idea to consult with an attorney to help you manage your assets.

This plan will outline how all of your various assets will be managed. The more specific your plan is, the easier it will be for future generations to manage your estate.

2. Create a Will

Maybe you’re not quite at the point of needing to consult with a lawyer on managing your estate. But at the very least, you should have a will in place. A will outline your wishes for what happens to your assets once you’re gone. It can also help minimize a lot of family arguments and tension.

3. Choose Your Beneficiaries

Whenever you open a new account at a financial institution, you have the option to choose a beneficiary. A beneficiary is simply the person who will receive access to those funds after you’re deceased.

It’s important that you pick this person ahead of time. If you don’t, this could cause a lot of disagreements within your family. And it could also result in the wrong person gaining control of your financial accounts.

Bottom Line

Building wealth takes a lot of hard work, and unfortunately, most families aren’t able to sustain it for multiple generations. But that doesn’t mean that it isn’t possible for your family.

And it’s definitely worth the effort. By building generational wealth, you not only secure your own financial future but that of generations to come.

Start by getting your spending under control, maximizing your income, and focusing on investment strategies to grow your wealth. And make sure to teach your kids good financial habits so they will be prepared to sustain and build on this wealth after you’re gone.

How to build generational wealth

If you’ve ever looked at your paycheck and wished the amount you were depositing into your bank account were higher, you aren’t alone. After all, higher balances translate into more freedom and opportunity and a greater sense of security.

Fortunately, building wealth isn’t just about working your fingers to the bone or begging the boss for a raise. From cutting expenses to embracing self-promotion, here are some effective hacks for increasing your wealth and quality of life.

1. Stop Watching the Clock

If all you ever do is focus on how much you get paid per hour, you’ll be working long hours for the rest of your life. Take a lesson from Tim Ferriss’ “4-Hour Workweek” and start thinking about how you can get paid for results instead of time. You’ll be motivated to work smarter, not longer.

2. Don’t Shy Away From Self-Promotion

Whether you’re advertising your skills or a business, you need to feel comfortable doing it. Promotion can sometimes feel pushy, but it’s a crucial part of business — especially if you’re trying to establish a customer base. Use social media, local advertising and other marketing methods to get your name out there.

3. Stop Confusing Wealth With the Appearance of Wealth

You don’t need to become a full-fledged minimalist, but it’s time to trim the proverbial fat. Look at your budget and identify the ways you’re throwing away money on overpriced nonessentials. Spa treatments, expensive restaurants, retail shopping excursions and unused gym memberships are excesses that can sabotage your financial health.

4. Change Your Playlist

When you’re not working, you should be learning and gaining as much knowledge as you can, whether it’s related to your business or not. Listen to audio books and podcasts while you drive, shower and clean your house. You’ll find that it’s as relaxing as watching a show at the end of the day, but you’ll be getting a brain workout instead of just vegging out.

5. Monetize Your Talents

If you dream of earning $1 billion, start with your talents. If you have a valuable skill, you could create a business around your talents. Whether you’re a skilled programmer with a vision for launching a development company or a fashionista ready to create your own product line, use your interests, passions and abilities to make money.

6. Get a Mentor

James Wilkinson, CEO and president of Pamco Machine Works, Inc. in Rancho Cucamonga, Calif., recommends that you find leaders in your industry and contact them for advice.

“Be bold by asking, writing, emailing or calling them directly,” he said. “Ask them to help you solve a specific problem, give you general advice or become your mentor.”

7. Drink More Water

Life’s simplest necessity can actually increase your wealth. If you cut back on sodas, coffee and other costly — and unhealthy — beverages and stick with water, you’ll reap the financial benefits. Plus, your body can become healthier and your brain more efficient.

8. Give More

Don’t make the mistake of thinking that greed equals growth or that your success must come at the expense of others. Help people by volunteering, giving your time, truly listening and being generous. Be happy to share your successes with people. You will create more avenues to success by gaining allies than by making enemies.

9. Stop Wishing and Start Setting Goals

Wealthy people don’t allow their successes to hinge on hopes or dreams. They commit to success by working to achieve clearly defined goals. Set some goals for the next week, month, six months and beyond. Define your goals and outline the smaller steps you should be taking to achieve them. A good calendar system helps.

10. Adapt as You Pursue Goals

While being committed to your project is important, you’ll also need to adjust your plan or perhaps even change your end goal, if needed. For example, if you’re developing an app and you start seeing the need to change directions, don’t be afraid to shift focus if it will mean long-term success.

11. Clear Clutter for More Brain Space

Some messiness might be acceptable as part of the “creative mindset,” but eventually clutter becomes a distraction to your work — whether you realize it or not. Clear your primary work area so you have space for your thoughts. You’ll be surprised by how much more productive you can be in a clean room, and you’ll learn your clutter is actually costing you money.

12. Drive Less

Not only will less driving save you money on gas, maintenance and potential accidents, but the exercise of walking and biking can help boost your brainpower by slowing brain cells’ aging, improving memory and alleviating anxiety.

13. Identify Needs and Invent Solutions

If you ever think to yourself, “I wish there was a product that could. ” then start thinking about how to turn those ideas into realities. Chances are good that, if you’ve identified a need, others would pay money for a solution to the same problem.

14. Accept Criticism

Don’t be too proud to accept advice and criticism. It doesn’t always feel good to hear critiques, but learning from them and moving forward can feel great. Use criticism to motivate you to perfect your business model further.

15. Ask Questions

Wealthy people are driven by a desire to learn and grow. By asking a lot of questions, you can learn from other people’s mistakes and experiences, gain knowledge about your field and create strong relationships with people.

16. Stop Blaming Failure on Bad Luck

If you want to be able to take credit for your successes, you need to start taking ownership of your failures. Success is as much a mindset as it is a status.

17. Block Your Time

As helpful as social media is for connecting, informing and entertaining, most people find themselves distracted too frequently. Between click-bait titles, cute videos, friends’ updated statuses and online games, it’s a wonder anyone gets any work done at all.

Set up a timer or a block on your computer for the websites that are your biggest time wasters. Create time blocks in your schedule for work and play. Your mind will be clearer, and you’ll have more time to focus on what’s important.

Generational wealth is an idea that’s easy to grasp, and not so easy to fulfill. For some, it’s a pipe dream. For others, it’s a part of everyday life in their family. There are tons of questions surrounding generational wealth. Here are some of the most common…

What is Generational Wealth?

Generational wealth is a large sum of money or net worth that’s passed down from a person to their children. The wealth can be money, a business, real estate and many other assets. It can also be any combination of such. If it’s handled correctly by each generation, the wealth will keep passing down.

How to build generational wealth

How to Build Generational Wealth

Yes, generational wealth is real. Yes, it’s attainable.

There are as many ways to build wealth as there are people on Earth.

Some people build wealth first, then set up the transfer logistics later. Some people set up the wealth to be generational as they build it.

You can use a combination of methods to grow your money into a big nest egg. Stocks, real estate and other passive income streams are great ways to build wealth. Many people also build a profitable business and hand it down to the next generation.

Set up your money to work for you, rather than you work for money. Also, know that what you do with your money can matter more than how much you make from working. A financial advisory or wealth-building program can help a lot.

There are many investment resources and newsletters out there. And we’ve narrowed down some of the best ones. You can check out these free investment newsletters… or sign up for Liberty Through Wealth below.

Any way you decide to build and protect your wealth, there are important steps to take when passing it on. You should pay special attention to preparing your children to inherit the wealth.

How to Pass on Generational Wealth

There are lots of ways to pass down your wealth.

You can give it through your will. The obvious way is to give your wealth upon your death.

You can give it while you’re alive. This is particularly useful when you’re giving something like a business. You can train them to do well, then put the business in their hands. If they need support, you can be there to help them. This takes the load off you and your kids.

It takes the load off you because you don’t have to be so worried about them losing the wealth. It takes the load off them for the same reason. Plus, they won’t have to manage everything on their own.

There are many ways to pass down generational wealth. You can set up trusts, savings plans, college funds, etc.

Talk to lawyers, accountants and especially a good estate planner.

It’s important to talk about your wealth. Show your kids what proper money-handling looks like. If you can’t show them, get somebody who can. Set up your children for success in whatever you give them.

If they have no idea how to handle and passively grow money, it won’t last long at all.

How Long Does Generational Wealth Last?

How far the money goes depends on how well the parents prepare the children. According to Williams Group wealth consultancy, around 70% of wealthy families lose the wealth by the second generation. And 90% of those families lose it by the third generation.

Prep your kids by making money fun. Introduce them to games that show them how to grow money. If they don’t keep playing, or they lose interest, it’s okay. Don’t force it, or they’ll resist.

Give them a little money to invest and show them how to grow their money. More importantly, teach them how to make money without pulling their original investment.

Show them what their money can do by allowing them to buy fun stuff. Have them use the money they made with their original investment.

If they’ll be inheriting a business, have them stick around work to see what you do. Give them responsibility and involve them.

The best thing to keep in mind is that play is the highest quality form of learning. When it comes to small kids especially, high quality learning will work best. If they don’t want to do it, they won’t. It must be fun for them. And if you try to shove it down their throat, they’ll not only resist, but they’ll try hard to get away from it completely.

Keep it fun for them, and you’ll do well.

When the kids get older, they’ll start taking more of an interest in money. The teen years and older are the prime time to get them involved.

I recommend going to professionals to help you learn the best ways to teach them.

How Much Money Is Generational Wealth?

There’s no set number when it comes to the definition of wealth. A person is wealthy if their income is greater than their expenses.

If you want to build generational wealth, take what’s left over and invest it into money-making assets. This will make you money work for you, rather than you work for money.

A good rule of thumb is this:

You’re wealthy when your income exceeds your expenses. You’re rich when you have $1 million+ in assets or net worth.

Why Is Generational Wealth Important?

For those who agree that money is good and decide to pursue great wealth, it’s easy to get lost in all the “get rich quick” schemes and non-schemes.

If you want to get rich, it’s important to think long-term. Yes, there are ways to “get rich quick”(er). I’m not saying you shouldn’t try to build wealth quickly. In fact, I’m a big believer that money loves speed.

But if you’re looking for guaranteed wealth, it will pay to think long-term. (Long-term meaning preparing your wealth to last longer than your lifetime.)

Time is powerful when it comes to investments. It took Warren Buffet over 50 years to reach his first billion. But since, his worth has topped $100 billion.

If you think long-term, you’ll be less likely to make harmful decisions. Here’s a post about why passive investments are far better than active investments.

“The Final Word” and Other Generational Wealth Opportunities

Generational wealth is something worth pursuing. It can help set you and your family up for happy, fulfilling lives.

If you’d like to find better ways to build and protect your wealth, consider signing up for Liberty Through Wealth below. It’s a free e-letter that’s packed with investing tips and tricks.

About Vanessa Adelman

Vanessa Adelman graduated with an Interdisciplinary degree. She majored in Entrepreneurship, Painting, Music and Film. Shortly after, she received a copywriting mentorship with Mark Morgan Ford. Then, she earned her AWAI Verification. Now, Vanessa freelances in the financial direct response industry. She’s been investing since 2016. In her free time, she enjoys books about money and wealth. She loves being with her boyfriend, hunting, fishing and going on outdoor adventures.

Thinking about money is an inescapable fact of life. We spend time contemplating how to save for our children's education, how much money we're going to have to live on when we retire, how to reduce our debt, and a myriad of other financial concerns.

But, have you ever considered your plan of action concerning generational wealth? If you're not familiar with the term, generational wealth is wealth that is passed down from one generation to the next. It's sometimes referred to as "family wealth" or “legacy wealth." Leaving wealth that you've accumulated behind for your children or grandchildren is your contribution to generational wealth in your family.

As you'll see, this wealth comes in many forms that can be passed down, such as stock market investments, real estate, or an education that can benefit the next generation.

There are varying types of generational wealth, such as lasting memories and healthy genetics left behind for your family. The generational wealth we'll be looking at concerns the financial resources you're able to leave behind.

How to build generational wealth

Creating generational wealth requires accumulating assets that you don't use so you can pass them along to your children when you pass away. Though it sounds easy, it's not easy to put into practice. If you find yourself currently struggling to build your savings, the thought of saving for the next generation can feel overwhelming.

For starters, take the time to create your own financial plan if you haven't already. This should include investment planning, retirement planning, educational planning, and other financial goals you may have. Once you have your plan in place to meet your own financial needs, you'll then be able to begin thinking about generational wealth.

If you're at that point in your financial development, how do you start accumulating assets to pass along? Here are five ways to start preparing to leave a legacy of wealth behind for generations to come.

1. Invest in the stock market

Though it takes time to understand how the stock market works and how to attain positive returns over time, you can rest assured that investing in the market will prove to be a sound investment if you're in it for the long haul. According to Goldman Sachs data, the average stock market return for 10 years is 9.2%, based on 140 years of tracking. Nobody knows what the next decade will hold as far as stock market returns are concerned. Still, history shows that if you're going to stay invested for a decade or longer, there is a high probability that you'll be profitable as an investor.

An excellent way to participate in the stock market is by contributing to your 401(k) retirement plan at work if you have one available. By investing in mutual funds that are part of your plan, you are investing in companies in the U.S., and abroad if you select an international or emerging markets fund. 401(k) plans offer several advantages, including pre-tax contributions and tax-deferred accumulation.

2. And real estate, too

Another great way to create generational wealth is by investing in real estate. It can be a reliable path to building wealth with its potential for steady cash flow and its increasing values over time.

Homeownership is a firm foundation for accumulating real estate assets. After buying your own home, you can continue to acquire properties throughout your life. You may find it surprising how quickly your real estate portfolio grows.

[ Related read: A simple new homeowner checklist for 2021 ]

3. Start your own business

As opposed to the passive income provided by the stock market and real estate, owning your own business initially requires very active participation on your part. It's a challenge to build a successful business, but it is a viable option to consider.

Research has shown that 30% of all family-owned businesses are passed on to the next generation, and 12% are still viable into the third generation.

To increase the odds that your business can make it through to the next generation, include your children in the business as soon as they're able to contribute. It's essential that they know how the business operates operationally and financially and how they can successfully continue with the business.

Not all children are interested in continuing to operate a family business. Many have their own hopes and dreams. If your business isn't going to make it to the next generation, you can consider selling the business and funding generational wealth in another form.

4. Protect your income

Building generational wealth is about more than making money. You also have to protect what you earn — or risk losing all the progress you've made.

Take life insurance. It provides the funds to protect your family in the event of your death. Without your income, your children might face less than ideal financial circumstances.

The death benefit life insurance provides can keep your children in their home and fund their education. If you own a life insurance policy that accumulates cash value, such as whole life or universal life, the cash buildup is an asset that can be taken out in the form of a loan or withdrawal, which can be used to fund a business or be gifted to the next generation.

The same goes for disability insurance. What would happen if you suddenly lost the ability to earn a living? How long could you live off your savings? And where would your loved ones turn to for support?

With a personalized disability insurance policy, you won't have to worry. It will replace a percentage of your monthly income if injury or illness prevents you from working. That way, you can continue to meet your financial obligations and take care of your family while you recover.

Generational wealth, or family wealth, is a goal that many people aspire to have. Learn the benefits of generational wealth and how to start building it.

How to build generational wealth

Head of Legal , Trust & Will

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Have you ever thought about how life would have felt much easier if you had graduated from school without any debt, or wished you had inherited a large sum of money? Alternatively, are you someone who was able to get ahead early in life because your family supports you financially?

Regardless of your situation, you may already understand the value of generational wealth without knowing it. It’s a method of boosting our financial wellness, so much so that we can ensure the financial wellness of our children and perhaps their children, and so on. Perhaps you’re focused on your personal finances, but if you’re thinking about starting or growing your family any time soon, now is a great time to learn how to build generational wealth.

What is Generational Wealth?

General wealth is passed down within a family, from one generation to the next. The first generation accumulates property during their lifetime, which they then pass down to their children. With successful and proper planning, those children can then pass down wealth to their own children, and so on.

Let’s use an example to help illustrate the generational wealth meaning. Paul and Jayne Smith are a married couple who come from humble beginnings. Their own parents survived through the Great Depression and struggled to make ends meet. They decided that they never want their children to go through the same experience, so they live a comfortable yet frugal life to build up a sizable savings account. Through their estate plan, they bequeath their life savings to their only child, Simon. Years later, Simon decides to use his inheritance to buy a rental property. After several years, he uses his profit to buy additional income properties. By the time he retires, he passes on a robust rental property business to his daughter Sandra.

The example above demonstrates how family wealth can be created and passed on. In this case, Paul and Jayne’s son Simon made the wise decision to use his inheritance to invest in real estate. He then created even more wealth and passed it on to Sandra, who will likely be able to pass on the family business to her own children. Building family wealth is no easy task, but when it goes well, it can be compounded with each passing generation.

Investing in real estate is just one of many ways to build generational wealth, which can take many shapes. Here are some examples:

Life insurance policies

Antiques and heirlooms

Why is Generational Wealth Important?

Have you ever heard the idiom, “it takes money to make money?” Although anyone can create their own wealth, those who have access to family wealth have the advantage.

The high cost of education, coupled with low wages and high costs of living, can make it difficult to get ahead. If you don’t come from family money, you may very well be familiar with the burden of debt. Creating wealth might not be an option until later in life, as it can take years to pay off school loans and credit card debt.

Individuals who have access to family wealth arguably have a leg up relative to those who don’t. Those whose families paid for their college education, or even helped them buy their first house, are economically advantaged over others. They have a financial head-start that allows them to begin building wealth much earlier in life. Freed up money that would have otherwise been spent on expenses and paying off debt can be used for investments or building a business.

If you plan to grow your family, you probably realize how important generational wealth can be. Personal financial wellness is often a priority for those who are single or don’t yet have their own family. However, once you plan to have a family, those priorities quickly change. Providing financial comfort for your future generations becomes a top priority, even if it’s in the long-term.

How to Build Generational Wealth – 3 Strategies for Building Family Wealth

It’s hard to argue against the importance of building generational wealth, especially for those who have children, or plan to start a family. If you feel ready to get started, you’re probably wondering what you should do next. Here are some actionable steps you can take to begin building family wealth.

1. Set up a trust

One of the most practical steps you can take to protect your generational wealth is to set up a trust fund. Trust funds can sometimes get a bad rap, but in reality, they are a powerful estate planning tool that allow you to have more control over how your wealth is passed on.

First and foremost, assets placed within a trust will allow you to avoid probate and certain taxes. This means that your children’s inheritance will be better sheltered from legal fees and certain taxes that can affect your inheritance.

Second, you get to decide on what terms your children will be receiving their inheritances. For example, you could designate that each of your children will receive their inheritances in increments, and only once they meet a certain milestone.

Know that you can set up a trust fund no matter how humble your beginnings might be. You can always add to the trust fund as time goes on, and the trust itself can be used to grow your wealth through investment portfolios. To help you get started, here’s our guide that will walk you through how to set up a trust fund.

2. Invest your money

Time and appreciation make up a powerful combination for growing your wealth without having to put in any extra work. Yes, you’ve guessed it: investments.

Diligently tucking your money away into a savings account is certainly laudable, but unfortunately won’t stand the test of time. Due to inflation, the value of your dollar today will only be worth a fraction of a dollar for your children’s generation. Instead of passing on a devalued lump sum, you can make a greater impact by investing your money in a way that it’ll be worth much more by the time your children receive their inheritance.

How to build generational wealth

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  • Gerald Grant Jr. and Gerald Grant III are financial advisors in Miami and coauthors of a new book about building generational wealth.
  • They said part of why it’s difficult for Black Americans to build wealth is because there are few people in previous generations of their families who have successfully done it.
  • They said Black communities should be intentional about supporting other Black businesses — or “circulating the Black dollar” — and investing in stocks.
  • This article is part of “Money That Lasts,” an ongoing series about generational wealth from Personal Finance Insider.

Building generational wealth from scratch isn’t easy for anyone. It’s especially onerous for Black Americans.

Due to centuries of racism and structural inequities in the US, the typical Black family has just 8.6% of the wealth of the typical white family, according to a 2016 estimate from the Brookings Institution. Without substantial and widespread change, the racial wealth gap will only deepen.

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In conversation with Business Insider, Gerald Grant Jr. and Gerald Grant III, father-son financial advisors at Equitable Advisors in Miami, said there are at least two ways Black Americans can start building wealth for themselves and their kids today.

Grant Jr. and Grant III specialize in wealth management, estate planning, business succession planning, and retirement planning. They are coauthors of a new book, “The Power of Generational Wealth: It’s More Than Just Dollars and Cents.”

1. Support other Black businesses

The Brookings Institution reports that about 4% of annual household income in the US is attributable to inheritances. For the richest among us, wealth begets wealth.

For many Black Americans in the position to build wealth for the first time, guidance and resources usually don’t come from previous generations, Grant Jr. told Business Insider. Instead, they must rely on each other by hiring people from their own communities and investing in each other’s businesses, he said.

“We have to start to learn that lesson and support other Black businesses so that they too can be successful,” Grant Jr. said.

Grant III calls it “circulating the Black dollar” and said it extends to homeownership and “employing and empowering your community.”

2. Invest in the stock market

Another step toward generating wealth within the Black community is addressing the racial investing gap, Gerald III said.

“Historically, African Americans have been a lot more conservative with their investments. They typically tend to invest in things like CDs and bonds, where other communities are actually investing in equity because they have the exposure and the knowledge to do so,” he said.

Income also appears to be a key factor in stock-market participation for Black Americans, according to a survey by Ariel Investments in 2015. About 57% of Black Americans earning between $50,000 and $100,000 were invested, while 81% earning $100,000 or more were invested. The share of white Americans invested in those same income ranges was 83% and 92%, respectively.

But since there’s such a large income disparity between Black and white Americans to begin with — the former earns about $24,700 annually, on average — even those figures don’t paint a full picture.

Grant III and Grant Jr. explain in their book that putting surplus savings “to work” in the stock market is crucial for growing wealth beyond what you’re able to accumulate working a typical 9-to-5 job. Over the past 140 years, US stocks averaged 10-year returns of 9.2% before taxes and fees, according to Goldman Sachs.

However, they write, new investors should consider working with an advisor to develop a plan because relying on trial-and-error in the stock market “can be a costly mistake.”

How to build generational wealthby Ricky Cheath

How to build generational wealth

How can a person accumulate enough wealth so that it’s passed down for generations? Before we directly answer that question, let’s talk about financial literacy and address some practical tips we should all be doing.

  • Get out of debt, and stay out of debt. If you are unable to pay-off all your revolving or installment debt, try to at least keep your revolving debt balance no more than 35% of your limit.
  • Open a savings account and have at least six months of your gross monthly expenses in an emergency fund. Get in the habit of saving!
  • Invest 12-15% of your income into retirement accounts — 401(k) and Roth IRAs. Max them out annually if possible.
  • As your income increases, resist the impulse to increase your standard of living. The two do not have to go hand-in-hand.

Once you’ve laid the foundation and practiced good financial habits, your personal credit score and income should be good enough to warrant a home purchase (assuming you have steady income). Purchasing real estate is one of the best ways to create generational wealth.

Start with a duplex, triplex, or fourplex

When you are ready to buy your first home, instead of jumping into a traditional single family home, think about purchasing a duplex, triplex, or fourplex with a government insured FHA mortgage (because the minimum required down payment is only 3.5% with a FICO score of 580 or higher). By owner occupying the duplex, triplex, or fourplex, you can then rent out the other units and use that income to pay your mortgage. Think about that for a moment. If someone else was paying your monthly mortgage payment, how much money could you save in 12-24 months?

If someone else was paying your monthly mortgage payment, how much money could you save in 12-24 months?

You will have to occupy that property for at least 1 year before you can move into another home.

Upgrade

After 12 months have passed, if you then wanted to move out of your duplex, Triplex, or fourplex to make room for yet another renter, you could. Then, on your next purchase you could get into a conventional Fannie or Freddie backed conventional mortgage with a minimum of 3% down payment (if you income qualify). In the event you make too much money annually for Fannie Mae’s HomeReady or Freddie Mac’s HomePossible low down payment program, no worries … you can still get into a conventional single family home for as little as 5% down (assuming you have the necessary minimum credit score of 620-640 needed for a conditional approval).

Following the best practices above, you could end up owning 2-4 rental units with minimal investment dollars down, earning you extra monthly income, as well as an asset that typically increases in value throughout the years!

Pass Down Knowledge

In conclusion, one of the most important things to remember when trying to help multiple generations within your family; pass down the knowledge you’ve learned. And remember, knowledge is NOT power until the knowledge is applied. Teach your children to work, earn, save, invest, and spend wisely. Proper financial literacy is typically not taught in schools. That in my humble opinion is one of the underlining causes pertaining to the homeownership disparity gap.

You don’t know what you don’t know

So it is your job to make sure each generation is armed with the necessary information to grow and preserve your families wealth. Because if you don’t come from a rich family, a rich family must come from you.