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Strategies to Build Generational Wealth for Your Family

When you look at the world’s wealthiest people, many of them were born into money, giving them a substantial boost as they grew up and decided what they wanted to make of their lives. Their family members before them were able to build generational wealth and, while not everyone experiences it, that doesn’t mean it’s a concept that’s reserved for the one percent.

Anyone can start building generational wealth if they make smart money choices and practice discipline with their money habits. Building wealth happens one step at a time, day by day. When you’re strategic and consistent over the span of a lifetime, you can pass on a financial legacy to your own children and grandchildren, too. The five strategies below can help you get started.

1.    De-stigmatize Money Conversations

Too often, families avoid talking about money, considering it to be a taboo topic. Often, though, those are the conversations that need to be had – no matter how uncomfortable at first. If you want to build generational wealth, you’ll need open communication about assets and vision.

Not only does this help all family members remain on the same page, but it also provides clarity when it comes to expectations and the direction you’re moving in together as a family. The more open the conversations, the better chance future generations will have at avoiding common pitfalls and traps that may jeopardize the family’s ability to maintain long-term wealth.

2.    Be Smart with Your Investments

Sure, investing in the newest trends may be exciting, but those investments may also be uncertain. If you’re looking to find long-lasting success in the markets, you’ll have to be smart about where you’re investing your money – and often that means tried and true investments that are much less thrilling but far more stable.

3.     Maintain Multiple Sources of Income

COVID-19 taught us all a few lessons about money. One of the big things we learned is that, in the face of unforeseen challenges, those with multiple sources of income tend to fare better than those with strong savings. Multiple sources of income lend to greater financial security and a better chance for wealth to pass to the next generation.

Younger people today have more skills, resources, and opportunities at their fingertips to create income sources than previous generations. Everywhere you look you can find someone turning their hobbies into a hustle that they can use to supplement their income. So, think about other ways that you can be bringing in money, whether that’s consulting in your area of expertise, starting a side business, or selling the produce you grow in your garden at the local farmer’s market. Whatever the case may be, having that extra income will help bring more stability to your long-term financial vision.

4.    Purchase Life Insurance

If your goal is to build generational wealth, you’ll want to have a life insurance strategy in place. Life insurance can be a powerful way to leave an inheritance that isn’t coming out of your pockets all at one time. As uncomfortable as it can be to think about your own death, you can find solace in knowing that your passing will bring a benefit that can set your loved ones up for financial success for generations to come.

Typically, there are two main types of life insurance, term life insurance and permanent/whole life insurance. Both come with their own list of pros and cons, so you’ll want to do research to determine which is the right fit for you. Term life insurance is the more affordable option; however, it only pays out if the policyholder dies during a specified time frame. Permanent/whole life insurance, while more costly, covers you for your entire life.

If you’re young and just starting to build your wealth, it may make more sense to start with term life insurance as it’s generally geared toward young, healthy people and will provide enough coverage to ensure your loved ones are taken care of should the unexpected happen. As you get to a stronger place financially and begin to prioritize minimizing tax liabilities, you may want to investigate switching to permanent life insurance since the payouts generally aren’t taxable, meaning so you’ll be able to transfer wealth without piling on a tax burden.

5.    Look for Opportunities to Invest in Your Loved Ones

Building wealth isn’t exclusively about money, though that’s certainly a large part of it. If you want to build generational wealth, you’ll also want to find opportunities to put you and your loved ones on more solid ground. For instance, investing in a 529 plan to help your children or grandchildren pay for school down the road or helping your family members make those big life purchases that will put them in a better position for success – like a first home or small business.

Even investing your time rather than your money can pay off in the long run. Taking the time to sit your children down and teach them the value of money and smart money management habits will ensure that they have an easier time finding financial independence and building their own wealth as they get older.

Doing what you can to help the next generation gain the skills, knowledge, and resources they need to help build on your legacy will ensure that all your hard work and planning don’t go to waste. These conversations can be about the important technical aspects of personal finance, but you can also use them as an opportunity to talk about your values, such as charitable giving.

Are You Ready to Build Generational Wealth for Your Family?

Building generational wealth that lasts is something that will take time and strategy to achieve. It requires the help of the entire family, from multiple generations, to make it happen. Whatever your goal is, whether a specific dollar amount, a way of life, or a vision that you have for the future of your family, taking it one step at a time is the best way to move forward. If you’re ready to take the next step in your wealth-building journey, be sure that you have all the help and resources you need to set yourself up for success.

At Paces Ferry, we pride ourselves on being a trusted advisor to all of our clients. Contact us today to schedule an introductory conversation where we can share more about our services and get to know you and your unique goals and needs so that we can help you determine whether we’re the right fit. We look forward to hearing from you!

Paces Ferry Wealth Advisors, LLC is a registered investment advisor with the U.S. Securities and Exchange Commission (“SEC”).  This material is intended for informational purposes only. It should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney or tax advisor.

Zachary Morris

Zachary Morris, CFP®

Having traveled to over 35 countries, Zach is a believer in Ralph Waldo Emerson’s statement that Life is about the journey, not the destination. Being a CERTIFIED FINANCIAL PLANNER™ provides Zach the opportunity to help clients define and realize their journey, and co-founding Paces Ferry Wealth Advisors, an independent firm, allows the freedom to define the client experience along the way.