Some Ideas on 3 Ways To Start Building Wealth For The Next Generation Today You Need To Know

Published May 08, 22
4 min read
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Your kids are never too young to learn how to budget. Discover tips for teaching kids how to manage money. “It's important to show your kids what it means to invest and how it benefits them over time,” says Tatum. “I have a lot of clients in their twenties that are afraid of investing because they've never had any experience in it.” Ultimately, ensuring your children have a positive money mindset is one of the best ways to set them up for lifelong financial success.

These are some strategies to build generational wealth as well as ensure it lasts. To generate wealth you can pass on, you need to acquire assets or save money you won’t need to spend in retirement. You then pass down the money and assets to children or other younger relatives.

Fortunately, it’s entirely possible if you are strategic with your finances. These four strategies are the most accessible paths toward building generational wealth. Invest in stocks Stocks are arguably one of the best ways to build long-term wealth. Some people recommend starting by investing in index funds that carry low costs.

The advantages to investing in index funds comes with the instant diversification and not carrying the responsibility for picking out individual stocks on your own. You can make money from stocks through capital appreciation and income from dividends. For the former, you follow the tried-and-true investing advice of buying low and selling high.

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As you age and wish to take less risk, you transition toward a capital preservation strategy. This is a similar strategy baked into the best target date funds, which automatically transition the funds’ holdings over time as you near your target retirement date. Invest in real estate Real estate is something tangible which can produce income for your beneficiaries.

Rental income also has several tax advantages, like having the ability to claim depreciation as a tax deduction, among the many other deductible expenses related to maintaining the property. While prices do fluctuate, homes have consistently increased in value over long periods of time. As a result, if the next generation does not wish to continue owning the home, it should be able to sell for more than you initially spent.

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As you receive distributions from stocks and other investments, rental income from real estate or money from other income sources, put aside as much as you can in a place where it will continue to grow. Ideally in tax-advantaged accounts first. Create a business to pass down There is a reason many small businesses have “& Sons” in the name.

The Census Bureau states that 90% of all business enterprises in North America are family firms. However, while almost 70% of family businesses state they want to pass the company to the next generation, only about 30% are successful in doing so. Businesses can be very profitable long-term, but it’s crucial that whoever takes over the business has interest in the industry and knows how to operate a business.

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This column was adapted by the author from a post on that site.

These people likely have the ability to avoid and other types of costly debt. Instead, their inheritance could go towards , assets which appreciate in value, or even towards purchasing their first home. However, it’s not easy to maintain generational wealth through several generations. Approximately lose their capital in the second generation and 90% have lost it in the third.

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How to Build Generational Wealth To build generational wealth you can pass on, you need to acquire assets or save money you won’t need to spend in retirement. You then pass down the money and assets to children or other younger relatives. While the concept is simple, unless you had wealth passed down to you, it can be slow to accumulate assets and extra money.

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→ Invest in Stocks Stocks are arguably one of the best ways to . Some people recommend starting by that carry low costs. An index fund is a type of mutual fund or exchange-traded fund (ETF) meant to match the components of a market index. The advantages to investing in index funds comes with the instant diversification and not carrying the responsibility for picking out individual stocks.

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For the former, you follow the tried and true investing advice of buying low and selling high. However, in terms of generational wealth, it may serve as a more strategic decision to focus on obtaining dividend-paying stocks. means you purchase stock in a company which then distributes a proportional share of their profits in the form of a dividend.

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