In simple words generational wealth are an asset, which is passed on to next generations in the form of tangible assets or rights. If you can leave behind some wealth for your future generation then you are contributing to the growth of generational wealth in your family.
Generational wealth usually is in the form of property, stock market investments, artworks of famous artists, gold, or diamond jewelry, which is passed on to future generations.
However, in some cases it may also be the income generating Royalty from the artistic works such as songs, novels etc. created by previous generations or Intellectual property rights/patents of some major discoveries done by previous generations.
You must have heard or known at least one person in your lives who is doing well in their lives because their parents or grandparents left some substantive inheritance for them and due to which they are doing relatively better despite being at the similar job or having same income structure.
If a person inherits some wealth from their past generations, they usually don’t have to start from the basics and struggle to build their way up unlike most of the persons who doesn’t inherit any wealth from their past generations.
Inheritance in the form of generational wealth may give a person a major head starts in their careers and enable them to afford a better lifestyle in comparison with their peers
However, it is very much necessary to note down your own retirement savings plan or other financial goals first before you start to save for generational wealth. Once, when you realize you have handled your current finances to fund your golden years properly, then only it is prudent to start saving beyond that.
Till now we understood the meaning and importance of generational wealth, however it is more important to know and understand, how to create generational wealth that could be safely passed on to the future generation as inheritance.
So, how should you start to save for generational wealth? Here are some best ways to start preparing to leave legacy of wealth for your future generation by following some planning and financial prudence.
Needs are usually the things which are basic in nature without which you can’t survive properly, on the other hand wants are mostly your desire which you can ignore like a foreign vacation or a bigger car, house etc.
Understanding the difference between them is very critical. Since you can save money by ignoring your desires and create wealth for the future.
Plan your budget diligently and try to set aside a suitable proportion towards creating wealth, which can be passed on to future generation.
Try to identify assets such as agricultural land or commercial properties that are undervalued in present time but has a potential to appreciate significantly in the future.
Invest in some riskier but fundamentally sound asset class such as good Crypto currencies, Small and Mid-cap stocks, that may give stellar returns if you stay invested in them for long enough.
Try to pay off your debts like home, car, or personal loans before their end of tenure. As it will leave more money in your pocket, once you pay off these debts and you will have more savings, which can be used towards the wealth creation.
Being frugal doesn’t mean that you need to be a miser in your life. Being frugal simply means that you are analyzing and opting for the better and less expensive ways for spending and buying the same things, which in any case you were going to spend or buy.
Try to create ECS for the investment from your income first before spending, as it will automate your savings and bring discipline to your investment. This will leave you with less amount for your discretionary expense.
A person who solely survives on their regular salary alone are typically not been able to create a sufficient amount of wealth, that’s why it is recommended to generate a passive stream of income such as dividend income from stocks, rental income from the commercial properties or some business which can be run along with your regular job.
Till now you have figured out the ways to build generational wealth, but you’ll also need to create a plan to pass it along properly, therefore, you also need to create a plan for the smooth transition of your assets to the next generation by following few steps.
While the term ‘generational wealth’, sounds amazing, but at the same time, you must be worried for critical issues about your present life. For instance, you might be focused on your current financial challenges, like your outstanding debt, future upcoming expenses, or maybe some other plans of fulfilling other financial goals.
In that case, it might be that building your finance for your future generation may not even be your priority right now as you are struggling with your current finances, but with that being said, you can still build into your long-term financial goals with the help of proper guidance and counselling.
At SingleDebt, we would be counselling and sharing the best practices & methodologies about how to build your wealth and leave a glorious legacy for your future generations to come.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. City Credit Management LLP is not liable for any decision arising out of the use of this information.