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How to create the wealth of the generation



Eight things anyone can do to leave a legacy for loved ones.

If you are a parent, you have probably asked yourself what kind of financial legacy you want to leave for your child or children. You may even have taken the important steps of buying life insurance to provide a financial safety net or creating a will to ensure that your assets will be distributed according to your wishes.

But you may not have thought about how your children's inheritance will be passed on to your grandchildren – or how the lessons you teach your children could eventually be passed on to younger generations. Generational wealth associations, which means that everything you give your children can help them build a better life for your grandchildren, which in turn can impart assets, skills and knowledge to your grandchildren. It is the kind of legacy that can continue to create wealth and financial stability far beyond your longevity.

We reached out to three financial experts to learn more about how to create generational wealth, which is why generational wealth is a key component of racial wealth. the gap, and how to think about the wealth of the generation in terms of not only money, but also skills, values, assets and resources. Not all of us can leave our children a significant financial legacy – but we can all do our part to provide the next generation with the tools they need to succeed.

In this article:

What is the wealth of the generation?

Generational wealth can be loosely defined as the money, assets, skills and values ​​that you pass on to the next generation. Many parents hope to bequeath their children, for example – but even if you can not leave your children money, you can still impart skills, values ​​and tools that your children can use to improve their lives, increase their opportunities and build wealth as one day can be transferred to your grandchildren.

This type of wealth – both asset-based and skills-based – is especially important if your family is part of a group of people who have historically been marginalized or do not have eligibility. "Generational wealth benefits families because it allows them to succeed despite socio-economic issues and obstacles that might otherwise limit them," said Bola Sokunbi, founder and CEO of Clever Girl Finance.

That being said, you do not have to pass on a significant legacy to enable your children to succeed. "You do not have to leave much if someone has the right tools to start life," explains Tom Anderson, financial planning expert and author of The Value of Debt in Building Wealth. Helping your kids graduate from college without taking out student loans, for example, can give them a huge head start in life – and that kind of financial planning reinforcement can help your kids create wealth that can be passed down from generation to generation. [19659012] What can you do to create generational wealth?

There are many ways to leave your children an inheritance – and not all inheritances involve money. In addition to making your children the beneficiaries of your investment accounts or your life insurance plan, you can also give your children other life-changing tools and skills such as a good education or strong financial values.

Here are eight different ways to create generational wealth for your household.

1. Homeowners

"Homeowners are the most important way we build wealth in this country," says Khalfani-Cox. "The average American who owns a home, they have a leg in many ways."

Not only do homeowners get federal tax breaks that are not available to tenants, but owning a home gives you equity – and you can use that capital to start a business, ride out tough financial times or help finance your children's higher education. "The lack of a house can be a serious financial disadvantage," explains Khalfani-Cox.

Sokunbi agrees and notes that home ownership can be a way of transferring wealth from one generation to another. Anderson, however, urges homeowners to be careful about treating their nests like a nest egg. "The challenge of a home is twice as much," Anderson said. The first challenge is to make sure your home appreciates value over time – which, if you remember how the housing market crashed during the Great Depression, may not be entirely within your control.

The second challenge is to make sure you keep your home long enough to pass on its value to your children. "We all live much longer, and it is rare that we still live in the house that we thought would be an asset at the end of life." Many people reduce to a smaller home before moving to a nursing home, health center or nursing home – and the value of the home is often set against the high costs of ending the care.

2. Small Business Ownership

A home is not the only great asset you can leave your children. If you run a small business, you have the ability to not only make your own money and be your own boss but also to pass the business on to your children as they get older. As a small business owner, you will give your children the opportunity to continue to grow their family fortune.

“If you look at millionaires in this country, the vast majority have made their fortune through property ownership and business ownership. "Khalfani-Cox explains. Your small business may not make you a millionaire, but it can still give you the opportunity to take control of your career and support your family – and who knows? Maybe it's your kids who are taking the family business for a million dollars.

If you are worried about the risks of starting a business, remember that there are also risks of working for someone else. . "Although it can be difficult to start and start a business, it is sometimes easier to create a business than to find a job," says Khalfani-Cox, "especially for women, African Americans and people who may feel that they have met a certain person. Starting a small business can change your family's life – not just right now but also generations from now.

3. Investing

Sokunbi, Khalfani-Cox and Anderson all talked about the importance of investing – and the ability to turn your long-term investments into the wealth of the generation.You do not have to be Warren Buffett to manage the return on the stock market.If you have a 401 (k) you have money that can eventually become part of your children's legacy. ] "List beneficiaries of any assets you may already have, no matter how small," says Sokunbi, "For example, workplace pension investment accounts." This is another reason why you should always sign up for your employer. res pension plan – and always take advantage of all the matched funds that your employer offers.

4. Education

"Knowledge in itself is wealth", explains Sokunbi, "because once you know what something means and how it works, you can take the steps required to implement your knowledge." For example, helping your children with their homework when they are young can help them apply for scholarships when they are ready to go to college.

You can also impart skills that can make your children's lives easier and more affordable, such as the ability to cook, plan meals in advance, and grocery shopping on a budget. If you have a side job or a small business, teach your children how to earn an income – so that they may be able to use what they learn to start their own business in the future. Make sure they not only understand the tools in the industry but also the skills involved in accounting, marketing, customer management as well as setting growth and financial goals for the company.

5. Values ​​

Many parents want to convey certain family values ​​to their children, such as kindness, generosity or compassion. If you are considering building generational wealth, you should also consider sending financial goals and values. "Children observe your behavior and actions," explains Sokunbi. "Simply seeing how you budget, pay down debt and save can have a huge impact on their financial decisions in the future."

Anderson agrees. "Train your children to save, and they will be rich according to their needs." You can start by setting up the classic piggy bank with three compartments: one compartment for expenses, one for saving and one for giving. From there, Anderson suggests that you ask yourself the following questions: “What would be the coolest values ​​for my children to have when they are older? What values ​​would create them for success?

Maybe you want to teach your children the importance of hard work. You may want to teach them the value of being their own boss. You may want to teach them about financial independence and the ability to live a life that is not dependent on a job. Choose your values ​​carefully, as they will be part of your children's heritage.

6. Life insurance

"Life insurance is one of the easiest ways to help pass on wealth to the next generation," said Khalfani-Cox – and we agree. Affordable life insurance can help protect your family from unnecessary financial strain, and the value of your life insurance can become part of your children's legacy.

Why is life insurance one of the most important components of the wealth of the generation? Because it allows you to set aside funds for your recipients without having to save the money yourself. "It can take you 20 years to save $ 250,000 or $ 500,000," says Khalfani-Cox. "You could just as easily buy a life insurance policy, and that insurance would cover $ 250,000 or $ 500,000. If something happened to you, your beneficiaries would get that payout.

In addition, a good life insurance plan can help reduce the racial wealth gap. "Life insurance is one of the very simple ways in which black people can start building wealth," explains Khalfani-Cox. Get a quote for life insurance.

"Life insurance is one of the simplest, uncomplicated ways to help pass on wealth to the next generation."

—Lynnette Khalfani-Cox

7. Annual Gifts

You do not have to wait until your death conveys generational wealth to your children. If you have the money to save, you can give it to your children while you are still alive, help them buy their first home, pay off debts and set them up for a strong financial future.

That said, it's a good idea to keep making annual gifts to your children until you've saved enough money for your own retirement and end of life. "You're either on your way to a comfortable retirement or you're not," Anderson says. "If you are, start giving annually." Read the IRS's rules on taxes and gifts to make sure you do not end up in a tax pipeline – for example, by 2020, parents can give children up to $ 15,000 each before gift taxes begin.

8. Philanthropy

There is another way to impart generational wealth – and that is by giving it to organizations that are designed to support, market and educate the next generation. Giving philanthropic contributions, either as a will, a donation or a recurring monthly donation, is a great way to make sure your money goes to a good cause.

People without children often wonder what to do with their assets both during life and after their death. Philanthropy can help you use your accumulated wealth to help others – whether you make a charity gift in addition to the gifts you pass on to family members, or if you appoint a charity or organization as your primary heir.

How has the wealth of the generation contributed to the racial wealth gap?

"You can not really talk about the history of the wealth of the generation in this country without having a conversation about racism and how structural inequalities were created specifically to move away from certain populations, especially black people," says Lynnette Khalfani-Cox, CEO of the financial education company The Money Coach and author of Zero Debt: The Ultimate Guide to Financial Freedom. "The idea was not to let them build wealth!"

There are many reasons why the racial wealth gap between black Americans and white Americans is so large – and several of these reasons are directly related to the concept of generational wealth.For example, a first homeowner buys not only an asset that can be passed on to the next generation.This homeowner can also give their children stability as a gift, as well as helping their children understand how the home buying process works and teaching their children to own a home is an important family value.Although their children never inherit any money from s home themselves, they will have inherited several related skills and tools that they can use to build their own security, stability and financial success – and that kind of generation's prosperity also worsens over time. [19659005] But not everyone has access to something as important as homeowners. The Urban Institute recently reported that 71.9% of white Americans own a home, compared to just 41.8% of black Americans – the largest gap in 50 years – a deficit that has its roots in shrinking, which is the habit of not letting blacks Citizens buy homes in predominantly white neighborhoods.

When you're part of a society that has been cut off from generations, building generational wealth may seem like an impossible goal – but that does not mean there are no opportunities to leave your children skills, values. and tools that can help them seize the opportunities and build their own wealth.

If you & # 39; re part of a society that has been historically privileged, you're also able to use some of your own wealth to help people who have & # 39; received the same benefits. Philanthropy, mentorship, activism and alllyship are all ways to convey the money, skills and resources that have helped you succeed – and sharing what you have earned and learned can take us all a little closer to closing the racial divide.

"You can not really talk about the history of the wealth of the generation in this country without having a conversation about racism and about how structural inequalities were created specifically to evade certain populations, especially black people"

—Lynnette Khalfani-Cox, CEO and author

Remember that generational wealth is not just about giving your descendants a legacy. It's about using what you have to make sure the next generation can feel a little better. By understanding that wealth is not always correlated with money and that you have the opportunity to share your skills and resources with both your family and your community, you are better prepared to pass on your wealth to the people who need it most – and because the generation Wealth associations can be your legacy of someone else's success, generations into the future.

Our Editorial Policy

Haven Life is a customer-centric life insurance agency that is supported and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe that navigating life insurance decisions, your personal finances and general well-being can be refreshingly easy.

Our Editorial Policy

Haven Life is a customer-centric life insurance agency that is supported and wholly owned by the Massachusetts Mutual Life Insurance Company (MassMutual). We believe that navigating life insurance decisions, your personal finances and your general well-being can be refreshingly easy.

Our content is created for educational purposes only. Haven Life does not support the companies, products, services or strategies discussed here, but we hope they can make your life a little less difficult if they suit your situation.

Haven Life is not authorized to provide tax, legal or investment advice. This material is not intended to provide and should not be relied upon for tax advice, legal advice or investment advice. Individuals are encouraged to seek advice from their own tax or legal counsel.

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Haven Term is a term Life Insurance Policy (DTC and ICC17DTC in certain states, including NC) issued by Massachusetts Mutual. Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. In NY, Haven Term is DTC-NY 1017. In CA, Haven Term is DTC-CA 042017. Haven Term Simplified is a simplified Life Insurance Policy Issue (ICC19PCM-SI 0819 in certain states, including NC) issued by C.M. Life Insurance Companies, Enfield, CT 06082. Numbers and functions for insurance forms and riders may vary by state and may not be available in all states. Our California agency license number is OK71922 and in Arkansas 100139527.

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