Building Generational Wealth: It starts with YOU!
Mortgage Advisor
Henry Wilkes
Published on May 1, 2021

Building Generational Wealth: It starts with YOU!

Generational wealth. Perhaps this is something you dream of, but have assumed simply isn't possible for you and your family. You can't picture yourself leaving your children a trust fund or inheritance. It's normal to be concerned about the future of those you love and how your family will get by long after you're gone. The truth is that you don't have to be a millionaire to leave behind a legacy.

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Passing down generational wealth is entirely attainable for you and your family. Let's talk about what exactly generational wealth and FIVE ways you can start working towards leaving behind a legacy.

What is Generational Wealth?

By definition, generational wealth is wealth that is passed down from generation to generation. This wealth can come in many different forms from real estate assets to investments to financial education. By passing down generational wealth, those who inherit it will have a significant financial advantage. Generational wealth compounds if handled properly and it all starts with one generation, YOU.

Generational wealth begins with building a strong foundation of personal finance. Personal finance skills help you to understand how to manage your income, your monthly expenses, and help you to budget within that income. Establishing a strong personal finance foundation will give you more room to focus on building wealth. Imagine if your parents could have funded your college education. This single act could have had a massive domino effect on your finances and debt as an adult. The more you think of these "what if" scenarios, the more motivation you'll have to start setting up generational wealth for your kids, their kids, and so on.

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Building Generational Wealth

The concept of building generational wealth may sound simple, but acquiring assets or saving money for someone other than yourself and your retirement can seem daunting. It's completely normal to feel overwhelmed by this concept when you're focusing on building your savings and retirement first.

We want to make generational wealth attainable for you. We'll show you how you can make this dream a reality when you start implementing any of the following five strategies today!

#1: Life Insurance

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Generational wealth comes from two main vehicles, one of them being life insurance. Life insurance allows you to build wealth easily by using a life policy as part of a wealth transfer strategy to a beneficiary. Setting up a life insurance policy while your kids are still young is going to allow guaranteed growth of your money every year. This can get your kids set up early especially as they get older. Also, since your risk of death increases as you age, life insurance tends to be cheaper if you purchase it when you're younger. If anything were to happen to you, it's comforting to know your family will have a security measure to fall back on.

If you don’t have a lot of wealth built up or are looking for a plan to build wealth for your family, then a wealth transfer strategy using life insurance products may be one of the few ways to instantly create wealth and increase the amount passed on to a recipient or beneficiary. It's important to speak with an insurance or financial advisor to compare your options and plan out your family's financial future.

#2: Home Equity

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Building generational wealth can start with building home equity. Buying a home comes with plenty of expenses and also many perks, one of them being the ability to build equity and one day get a great return on your investment. Equity is the difference between the fair market value of your property and the amount you owe your lender. Since properties are almost always appreciating, your principle will go down as your equity goes up. This makes buying a home a risk-averse investment.

Your home and the equity built in your home could pass down wealth for the generations that follow. Equity growth rates will vary, depending on your market, your home's condition, and other factors. However, on average, you are likely to expect home prices to appreciate about 3% annually over time.

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Aside from the purchase of your first home, you also can buy more properties throughout your life and build a strong real estate portfolio. You can use your properties as potential rental income, fixer-uppers, or just to buy and use as a vacation home! Either way, you are passing these assets down to your children! To learn more about real estate investing, be sure to check out our Real Estate Investing Blog https://wilkesmortgagegroup.com/blog/

#3: The Importance of Education

Education can provide your children with the means to support themselves in the future and continue to build on the generational wealth being built. It starts as simply as emphasizing the importance of education and the power it can have on your future. No matter what life throws at you, your education is forever. Having a strong educational foundation can even out the playing field for your children in the future and open them up to high-paying jobs.

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If you can help your children make it through college without any student debt, you are setting them up for a bright financial future. The average student loan debt is currently about $32,731, a number that will keep increasing over time. Imagine the relief they will feel without that amount of debt holding them back!

#4: Family Business

While it may not be for everyone, having a profitable family business to pass down to future generations is an amazing way to leave a legacy and wealth behind. Over 30% of family businesses transition to the second generation, if your interests and abilities line up with your children's, it's an amazing gift to be able to pass down.

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Set the standard for success and involve them in the business from an early age. This will peak their interests and also show them how the business operates and how to be successful. Even if owning the family business isn't in the cards for your children, selling the business one day can also fund generational wealth in other ways!

#5: Leading By Example

The most important thing you could pass down to your children is a legacy of good values and integrity. Lead by example and strive to demonstrate hard work, success, and kindness for your children. Passing down these traits will ensure their future success as good humans making an impact in the lives of others. For example, at Wilkes Mortgage Group, our greatest driver is putting families in homes. From day one, that has been our mission and our proudest achievement. We make sure that our children understand where we came from and how we're working towards creating a better future for all.

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Ensuring Generational Wealth Lasts

You may have heard the phrase, "rags to rags in three generations," meaning, sometimes generational wealth won't last three generations. The first one creates it, the second generation spends it, and the third generation gets none of it. Leaving a legacy behind that lasts requires a strategy to equip future generations with plans.

  1. Have the right mindset. Think about the big picture, helping the future family whose face you don't know yet. Focus on passing down a strong mindset and both financial and ethical values to your children so they pass that down to their children and so on.
  2. Be open with your family about your assets and intentions for the future. Communicate your knowledge, wisdom, and dreams to your family to pass down generation after generation.
  3. Finally, don't forget to put your intentions in writing. Work with an estate planner to administer your generational wealth plan for generations to come. The first generation to inherit your estate should have a clear-cut plan to follow to preserve and grow the wealth left behind.

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To maintain generational wealth, the goal should be to set specific instructions for how money is to be used, placing restrictions on how money is accessed, and how money is to be replenished.

Let's Get Started!

If you're ready to start building wealth for generations to come, buying a home and building equity is one of the best ways to do it and one of the most realistic ways to start! Ready to take the first step? Check out our home purchase qualifier to see how much home you can afford in minutes! https://wilkesmortgagegroup.com/

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Mortgage Advisor
Henry Wilkes Mortgage Advisor
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