The phrase "generational wealth" has become increasingly popular in recent years, but what exactly does it mean?
It's somewhat of a vague, catch-all phrase with a definition heavily dependent on who you ask. But there's an underlying idea that it communicates to us all — wealth that's bountiful enough to provide for generations to come.
That seems like a lofty goal, but it's within reach for all of us if we make some good decisions.
The essentials — building generational wealth
Forming habits: Decisions can benefit from compounding interest just like money. The choices we make throughout our lives will have a snowballing effect on the course we follow, and money choices are at the epicenter of that. Making good decisions that form good habits early on is quite possibly the most important thing we can do to facilitate wealth creation down the road.
Cover the basics: Aiming big doesn't allow us to escape the mundane either, and it's often the slow and steady route that creates generational wealth by accident too. Save, invest, and max out your retirement plans + offer benefits as early and often as possible. It might sound boring and slow, but remember, compound interest piles up fast, and actions do too.
Invest in your heirs: The more lottery tickets you have, the better your odds of winning. By investing in your children and grandchildren through their education, training, and other valuable life experiences, your family's chances of creating generational wealth increase exponentially.
Aiming wider
Start a business: Family businesses are one of the most common sources of generational wealth out there. Not only is a business a store of value, but it's also a source of income as long as it's owned. It's no walk in the park to start and maintain a business that can span generations, but it's entirely doable with careful curation and a little luck.
Non-traditional investing: Traditional investing is a great way to ensure a "nice" retirement, but it may not be enough to create generational wealth. Investing more in alternative opportunities, if you can, into the likes of real estate, angel investing, growth investments, commodities, and other typically higher-risk assets may provide this exposure as long as you're careful.
Talk about money: Discussing money is often taboo for families. To cultivate a positive money mindset in the next generation, openly address money matters, offer lessons, and share your experiences. Encourage healthy habits, such as giving your child a weekly allowance and guiding them in budgeting for their wants and needs instead of indulging every request.
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