Build Generational Wealth In 6 Best Ways - A Guide (2024)

Have you heard of the term “old money”? It refers to people with wealth passed down from earlier generations. You may wonder how those families managed to build generational wealth. You are not alone.

For some, it might be intimidating to think about generational wealth because it is generally associated with multi-millionaires and billionaires like Elon Musk.

Most people don’t realize that even if you’re leaving a net worth of a couple of thousand or hundreds behind for the next generation, you’re contributing to the growth of your generational wealth and ensuring your descendants’ wealthy financial future.

Intrigued? Read on.

What is Generational Wealth?

Any asset that families pass down to the next generations, be it children, grandchildren, or any kin, is generational wealth. These assets can include real estate, stocks, businesses, and anything with financial value.

An example of generational wealth would be the British and Saudi Royal families. They have been building wealth for hundreds of years.

According to Investopedia, the top 10 richest families by estimated wealth are:

• The Waltons with $238 billion.
• The Mars family with $142 billion.
• The Kochs with $124 billion.
• The Hermès family with $112 billion.
• The Sauds with $100 billion.
• The Ambanis with $94 billion.
• The Wertheimers with $62 billion.
• The Johnsons with $61 billion.
• The Thomsons with $61 billion.
• The Boehringer, von Baumbach Families with $59 billion.

Building generational wealth isn’t important so that you can show it off on Instagram. Or have your private jet take you on vacation at a moment’s notice.

You want to build generational wealth because more financial independence and security means more options in life, which isn’t only better for your current situation: it also opens up more opportunities for your children. You would want the best for your children and ensure that they have better financial prospects in life than you did.

You can never live life without going through hardships. Thus, the next best thing is to minimize that curve to ensure that your offspring have the best resources and education available to continue the family legacy and wealth.

How to Build Generational Wealth?

When you want to build generational wealth, the first thing that comes to mind is to save more money wisely.

However, saving can only go so far.

You need a more robust investment and savings plan to ensure wealth goes on for multiple generations. We have made a list of some of the ways you can start to accumulate generational wealth below.

1. Real Estate Investment

Investing in real estate is a great way to start building generational wealth.

Unfortunately, many people don’t have any experience with investing, which can be a wall too high for some to climb over.

But, you can start with small investments. For example, invest in an apartment that you can rent out or a shop. Many people starting their businesses and start-ups need a place to operate. They will be looking for a place, and you’ll have what they want.

You will generate income that way, and with time the value of your real estate will go up, whether it’s an apartment or land.

If you’re looking for the easiest platform to get started, there are plenty of platforms out there that let you invest in real estate from $10.

Here are some platforms you can use to get started for free:

• Best US real estate crowdfunding platform: CrowdStreet
• Best European crowdfunding platform: EstateGuru
• Best crowdfunding real estate for beginners: Fundrise
• Best REIT option: DiversyFund

2. Start a Business

Starting a business is another excellent way to ensure you accumulate money for the next generation and keep the cash flow going for the future.

This option is situational and depends on the interest of your children. If they are interested, include them early on so they have enough experience to take over when they grow up.

However, suppose they aren’t interested in taking over the family business. In that case, think about selling it off and investing that money in real estate or starting another business more aligned with their interests.

You can also start them young by discussing business ideas with them. There are plenty of companies that buy invention ideas.

3. Stock Market Investment

Investing in the stock market as a long-term financial plan is one of the best ways to build generational wealth through passive income.

Many investment options, tools, and applications can help ease the process of investing in the stock market and provide financial tips, which is especially important if you’re starting.

While it can be a bit intimidating, it’s not rocket science. Just a bit of time and dedication is required to know the dos and don’ts of the stock market.

Investing in index funds or looking for stocks of long-standing and stable companies for the best returns can be a great idea. Here are a couple of funds you may want to check out so you can start building your investment portfolio now:

• QQQ Vs. SPY: Which Is The Better ETF Investment?
• VT Vs. VTI – Which Best Low-Cost ETF Should You Invest In?
• VXX Vs. VIXY Comparison – Which Volatility ETF Is Better For You?

4. Education

A good education cannot be overly emphasized. Education opens up more pathways than you can imagine. It can give you the high-income skills necessary to start your venture and surround yourself with like-minded people.

Just like that, education will enable them to compete in the market and land high-paying jobs at the companies with the best benefits. These will contribute to their growth and lead to the development of generational wealth if they focus on it.

It will likewise help them expand their social circle since having good and reliable connections will allow more opportunities to capitalize on.

You can give them a financial education to ensure that they can handle their personal financial situation and the money you leave behind. Raising financially independent children by giving them the best education is a reliable way of ensuring that generational wealth lasts.

5. Multiple Generators of Revenue

Having one source of income or business means you’re one loss away from bankruptcy or landing on the streets. Multiple income streams ensure you have something to fall back on, collect yourself, and get back in the fight.

Setting up sources of passive income is the best way. That includes renting out properties, royalties, etc. You can become a shareholder in a new business or fund an artist to help them reach their goal. How much you earn in royalties that way depends on the contract. The better way is to make something of your own and put it on the market.

Here are some ways to earn income passively:

• Utilize your existing real estate. You can use what you already own and rent it to earn rental income. You could register with Airbnb or list your extra bedroom or real estate with a local/online realtor.
• Rent your car when you are not using it. Some services like Turo and GetAround can help you rent your car.
• Dividend stocks are a popular form of passive income. If you invest monthly in stocks, you build up passive income over time. Our favorite brokers are M1 Finance when you’re based in the US, which is a FREE investment platform. If you’re based in Europe, DEGIRO is the broker I use to invest with lower fees.
• Buy and profit from a small business. Some small businesses can basically operate on their own or with just minimal supervision. For example, you can invest in a carwash, storage rental, and laundromat. You could also be a franchisee or an automated teller machine (ATM) operator. Now that’s a money-making machine for you!
• Open a Peer-To-Peer Lending account. I am in love with peer-to-peer lending! P2P lending is a great form of passive income. As you’re investing in P2P platforms, you’re the ‘bank’ that provides money to borrowers on the specific P2P platform you’re investing in.

6. Life Insurance

Many people don’t like to talk about this, but this is a fact that none of us can deny. Death is one of life’s biggest mysteries, and no one knows how much time they have left.

Life insurance is an excellent way to ensure that your family’s financial needs will continue to be taken care of in the event of your untimely demise. It will make them financially stable enough to grieve and carry on your legacy.

Why Can It Be Difficult to Keep Generational Wealth?

Statistically speaking, 70% of family wealth only makes it to the second generation. 90% lose all their generational wealth by the third generation. Why is that?

One of the reasons people lose their generational wealth is not managing their money well. They turn their wants into needs, inflate their lifestyle, and spend more than before. Not budgeting and having bad spending habits means it’s harder to get ahead over time.

The second reason people don’t build generational wealth is a lack of communication. They do not talk about the generated income or their long-term financial goals. Talking to your children about your financial life and contingency plans in a manner they understand from an early stage is crucial. Slowly bring them up to date as they grow up, so they understand how money works.

Building generational wealth is not easy; you’ll need to take these steps if you want it to last for more than three generations.

Hiring a financial planner, accountant, or lawyer is advisable to keep your generational wealth. Not doing so may be the eventual downfall of family businesses or real estate. Having professional advisors deal with these by giving legal or financial advice will take the load off you so you can focus on other ventures.

People who build and sustain generational wealth have a lot of discipline and strict routines, know the hardships of life, and are willing to make sacrifices. They have a long-term goal and a plan to execute it. They follow that plan to the T, get help along the way from professionals, and have an open line of communication with the next generation.

How to Pass on Generational Wealth

There are a couple of ways to pass on generational wealth. Check out the list below.

1. Account Beneficiaries

Naming account beneficiaries is an easy and surefire way to pass your wealth on to the next generation.

It’s a simple process of naming beneficiaries on your account. After that, your assets will be divided and distributed efficiently.

Estate planning also comes in this, so if you have a lot of real estate, then talking to your lawyer and advisor is recommended so they can make an estate plan that ensures a process that is as hassle-free as possible.

2. Writing a Will

If you don’t have a will, the state will handle your assets after your death, so it’s better to write a will and be as detailed about your requirements and wishes as possible.

Preparing your will can ensure no conflicts within the family and that all your assets are fairly distributed among your loved ones.

3. Trust Fund

The last method to pass on your wealth to the next generation is to make a trust fund. You can hold a trust fund to transfer your assets into it. A trust fund has perks, such as reduced estate tax.

Start Building Generational Wealth Now

Building generational wealth is not easy, but most things worth doing are hard.

Talk with your family or partner about where you want to start. Not everyone wants to start a business or invest, so figure out the best option for you and start from there.

After selecting the option you want to start with, make a plan, hire someone with experience to help you out, and execute it with discipline and dedication. The next step will be to secure the wealth you’ve accumulated.

Look for opportunities to further invest in or expand your current venture. Use the money to make more money. Teach the next generation about the lessons you’ve learned so that they value and understand the complexities of finances.

Give them a good education so they grow up to be good, outstanding, and financially responsible adults that you can be proud of and carry on your legacy.

Frequently Asked Questions (FAQs) – Build Generational Wealth

What Does Building Generational Wealth Mean?

Building generational wealth means acquiring assets that increase your financial security and status and passing them on to the next generation. These assets include real estate, stocks, businesses, etc.

How Much Money Is Considered Generational Wealth?

There is no set value to determine generational wealth. It varies from household to household. Everyone has a different lifestyle, which determines how much is considered generational wealth.

Someone used to spending $500,000 a week will blow through an inheritance of $1 million in no time. However, someone who knows how to grow the money and invest it properly for the long term can turn it into generational wealth.

What Are Examples of Generational Wealth?

Generational wealth includes investments, property, businesses, stocks, trust funds, and anything with monetary value.

Conclusion – Build Generational Wealth

While becoming rich in itself is already challenging, making it generational is even harder.

In building generational wealth, it is important to note that an older generation should pass on more than just assets to the next generation.

Education should be on top of the list as the best investment to create sustainable wealth. So is planning, from basic personal financial planning to more long-term estate planning.

Financial strategies to build wealth should also be carefully considered and implemented to ensure that your family’s future will be secure, stable, and promising enough for wealth to last through several generations.

Start building generational wealth by checking out our related links to learn about financial freedom, saving, and investing. New money will eventually be old money with mindful wealth-building.