Generational wealth may conjure up s of railroad titans from the late 1800s, or today’s tech billionaires. Generational wealth, on the other hand, is valuable and available to a lot more people than you might think, even you!
We’re here to help you understand generational wealth, why it’s beneficial, and how to start building it, no matter your current financial situation.
Ever wonder how some families manage to stay wealthy for generations while others struggle to make ends meet from paycheck to paycheck? I’ve been obsessed with this question for years, and after diving deep into research and talking with financial experts, I’m excited to share what I’ve learned about building generational wealth – money that doesn’t just benefit you but can be passed down to your children, grandchildren, and beyond.
Actually, passing down wealth isn’t just possible for very rich people or people who were born with silver spoons in their mouths. Regular people like you and me can also build up large amounts of wealth to pass on. It just takes the right approach, patience, and financial know-how.
What Is Generational Wealth Anyway?
Before we dive in, let’s get clear on what we’re talking about Generational wealth refers to financial assets that can be passed down from one generation to the next. This could include
- Financial assets (cash, investments, savings)
- Real estate and property
- Business ownership
- Intellectual property
- Collectibles and valuable items
The goal is to accumulate enough that you can provide a significant financial boost to your children or grandchildren – giving them a head start that might change their life trajectory completely.
The Shocking Reality of Wealth Transfer in America
According to Cerulli Associates, as baby boomers die off, about $105 trillion in assets will be given to their children and grandchildren by 2048. Did you know that this is called the “great wealth transfer”?
But here’s the kicker – most of this money will go to people who are already wealthy! Data from the Federal Reserve shows that those in the bottom 50% of income earners only inherit an average of $9,700.
That’s why it’s so important for everyday folks to start building generational wealth now. Ready to get started? Let’s dig into the steps.
7 Powerful Strategies to Build Generational Wealth
1. Get Your Financial House in Order First
You can’t create wealth for future generations without first creating it for yourself. This means:
- Eliminating high-interest debt: Those credit card balances and personal loans are wealth-killers
- Building emergency savings: Aim for 3-6 months of expenses
- Creating positive cash flow: Spending less than you earn is the foundation of all wealth-building
Manager of Wealthspire Advisors Zach Gering says, “You need to get a handle on your cash flow first.” You can then thread a needle to give your kids a financial head start after that. “.
2. Diversify Your Assets
Income alone usually won’t create generational wealth. You need to put your money into things that will grow over time:
- Real estate: A paid-off home can be a significant inheritance
- Stock market investments: Focus on long-term growth
- Retirement accounts: Roth IRAs offer “the most bang for your buck” according to financial advisors
- Business ownership: Many wealthy families built their fortune through entrepreneurship
The key is to spread your investments across multiple asset classes to manage risk while pursuing growth. As Matt Fleissig, CEO of Pathstone, notes: “Find the blue ocean” – meaning look for untapped markets or unmet needs if you’re building a business.
3. Consider Starting a Business
Starting a business is one of the most powerful ways to build generational wealth. Entrepreneurship has created more millionaires and billionaires than any other path.
A successful business can:
- Generate significant income during your lifetime
- Become an asset you can sell when ready to retire
- Provide employment and income opportunities for family members
- Be passed down to children who can continue growing it
It’s not without risk, but the potential rewards are enormous. Many family businesses become the cornerstone of generational wealth.
4. Create a Proper Estate Plan
Building wealth is only half the battle – you also need to ensure it transfers efficiently to the next generation. This means:
- Setting up appropriate trusts and legal structures
- Creating or updating your will
- Ensuring real property is titled correctly
- Converting traditional retirement accounts to Roth accounts when appropriate
- Documenting your wishes clearly
As Jackie Prideaux, senior lead advisor with Brighton Jones, explains: “These are the types of things a financial planner cleans up. A good planner will make sure everything has been checked off a person’s to-do list to ensure a smooth transfer of wealth.”
5. Involve Your Children Early and Teach Financial Literacy
Here’s a scary statistic many financial advisors talk about: “Shirtsleeves to shirtsleeves in three generations.” This refers to the common pattern where the first generation builds wealth, the second generation spends it, and the third generation starts over from scratch.
To break this cycle:
- Talk openly with kids about money from an early age
- Create opportunities for them to manage money (allowances, junior investment accounts)
- Share your values around money and wealth
- Teach them how wealth is created and maintained
“We’re very big believers in being very open with kids early on,” says Fleissig. “We’ve seen families create mission statements. We’ve seen families write books.” Whatever approach you take, communicating values and raising financially savvy kids is key to preserving wealth across generations.
6. Pay Off Your Home
Your home is likely your biggest expense, but it can also become your biggest asset. An inherited home, or the proceeds from selling one, represents a significant transfer of wealth.
Benefits of homeownership for building generational wealth include:
- Building equity over time as property values increase
- Creating forced savings as you pay down the mortgage
- Providing housing security for future generations
- Accessing home equity through loans for other investments
If buying your dream home seems impossible right now, consider starting with a smaller “starter” home that will help you build equity for future upgrades.
7. Embrace Patient Capital and Long-Term Thinking
The most successful multi-generational wealthy families think in decades, not quarters. They:
- Hold quality investments through market cycles
- Make decisions based on long-term impact rather than immediate gains
- Focus on sustainable growth strategies
- Resist get-rich-quick schemes
With a 10% return on investment, $100,000 can grow to $1.6 million in just 28 years! That’s the power of compound interest and patient investing.
Real Talk: Challenges to Building Generational Wealth
Let’s be honest – building generational wealth isn’t easy, especially if you’re starting from scratch. Some challenges you might face:
- Income limitations: It’s harder to save and invest when income barely covers expenses
- Lack of financial education: Many of us weren’t taught money management growing up
- Family emergencies: Health issues or other crises can deplete savings
- Market volatility: Investments can lose value in economic downturns
- Policy changes: Tax laws and regulations can impact wealth transfer strategies
Despite these challenges, even modest steps toward building generational wealth can make a huge difference for your family’s future.
My Personal Take: Start Where You Are
I’m not gonna sugarcoat it – building generational wealth takes time, discipline, and sometimes sacrifice. But here’s what I’ve learned: you don’t need to be rich to start.
If you’re paying off debt, that’s building generational wealth.
If you’re saving for retirement, that’s building generational wealth.
If you’re buying a home, that’s building generational wealth.
If you’re teaching your kids about money, that’s building generational wealth.
Every financial step you take today creates ripples that can benefit your family for generations. The key is to start where you are with what you have.
The Five-Step Starter Plan for Generational Wealth
If all this feels overwhelming, start with these five fundamental steps:
- Pay off debts: Especially high-interest consumer debt like credit cards
- Buy a house: Even a starter home helps build equity
- Start long-term investing: Aim to invest 10-15% of your annual income
- Create an estate plan: Make a list of assets and determine beneficiaries
- Share your financial wisdom: Teach your children about money management
Remember, the greatest legacy you can leave isn’t just money – it’s the knowledge of how to manage and grow wealth responsibly.
Final Thoughts: Your Wealth Legacy Starts Today
Building generational wealth isn’t just about money – it’s about creating opportunities and security for those you love most. It’s about breaking cycles of financial struggle and establishing new patterns of prosperity that can benefit your family for generations to come.
Whether you’re just starting your financial journey or looking to optimize your existing wealth strategy, the steps outlined here can help you create a legacy that extends far beyond your lifetime.
What steps are you taking to build generational wealth? Have you had conversations with your family about money and inheritance? I’d love to hear your thoughts and experiences in the comments below!
PS: I’m not a financial advisor, just someone passionate about helping families build lasting wealth. Consider consulting with financial professionals before making major money decisions that could impact your family’s future.
Why is generational wealth a good thing?
Generational wealth creates stability and a firmer financial foundation. Stability and financial flexibility make pursuing opportunities and dreams more possible.
Creating wealth for your future and the future of the people you love, through owning a home, saving and investing, and using smart financial strategies lets you and your heirs make choices based on what’s important to you and to them.
We all know that planning for your children’s futures is inherent in being a parent. Generational wealth doesn’t mean creating a world where your kids and their kids never need to work, but it can be an essential leg up in their long-term planning and opportunities. The same goes for nieces, nephews, other young relatives, or family friends with children you hope to support well into the future.
The generational impact can also extend positively throughout your community, creating benefits beyond your immediate circle. Early planning is the best way to make sure that your heirs have the stability and skills to make a positive impact on their communities, support charities that are important to your family, and take advantage of opportunities.
“Building wealth from one generation to the next requires careful planning, good money management, knowing how to pass on assets while minimizing taxes, and teaching the next generation how to manage and grow their inheritance.” Investing in real estate, starting and growing a business, investing in the stock market to diversify your portfolio, getting life insurance, and making an estate plan are all tried-and-true options. Here are three tips to get started — and where to head next!”.
– Leandro Vicuña, JD, Head of Trust & Estates at Fremont Bank
What is generational wealth?
Talking about money and wealth was long considered rude or impolite, but that has changed as personal finance conversations entered popular culture, especially online.
Generational wealth refers to the assets and wealth passed on to your heirs (however you define that) to provide greater financial security and freedom. Your heirs may be your direct descendants — one generation out of your children, and then their children. Heirs can also be friends, the children of friends, or extended family, like nieces and nephews.
Generational wealth is about building foundations. For some individuals, it’s about giving the gift of greater financial security or freedom — strengthening a foundation that already exists. For others, it’s an effort to break the cycle of struggle or poverty, and create new opportunities for future generations.
Generational wealth considers financial wealth and other assets, including: Liquid funds, savings, and investments Assets, including real estate and valuables like art, collectibles, precious metals, and gems Business ownership Intellectual property held, including patents, copyrights, and trademarks
5 Steps To Generational Wealth
FAQ
How to obtain generational wealth?
Follow these five steps to get started on your generational wealth building journey:Step 1: Pay off Debts. Think of debt as missed opportunity. Step 2: Buy a House. Step 3: Start Long-term Investing. Step 4: Put an Estate Plan in Place. Step 5: Share Your Financial Wisdom.
How much money is considered generational wealth?
There’s no universal dollar amount for generational wealth, but a common guideline suggests that properly managed and invested, $5 to $10 million is a strong starting point to ensure wealth lasts for multiple generations, while other sources consider amounts like $1. 5 million per child or a general seven-figure inheritance to be the baseline for generational wealth.
What is the secret to generational wealth?
Spend within your means so there’s something left behind for future generations. By doing so, you will not only leave a financial legacy, but also pass down the knowledge and values needed to sustain that wealth for generations to come. Start now, and let your wealth continue to grow long after you’re gone.
What is the 3 generation wealth rule?
The three-generation rule of wealth suggests that most family fortunes vanish by the third generation, a trend often attributed to the shift from an entrepreneurial mindset to a beneficiary one, where heirs lack the financial understanding and stewardship skills to protect the wealth. This cycle is often called the “three-generation curse” and can be reversed with strategies like early succession planning, financial education, the creation of family offices, and fostering a culture of responsibility and asset stewardship among heirs.
How can I help my family build generational wealth?
You can involve them in your budgeting process and you can also explain financial terms and concepts to them as they get older so they understand how money works, what they will need to do to maintain wealth, and how to create generational wealth for their own legacies. Learn how to build generational wealth for you and your loved ones today!.
How to build generational wealth?
When it comes to how to build generational wealth, creating multiple streams of income is a smart way to go. There are a variety of income streams, but one of the best is known as passive income. Active income is when you trade time for money, such as a job or side gig.
What is ‘generational wealth’?
Wealth takes many forms, such as real estate assets, investments, or a financial education to carry forward into the future. It’s also important to note that there isn’t a specific amount of money that is considered “generational wealth”. Rather, it’s any wealth that you give to the next generations in your family.
Why should you invest in generational wealth?
Kelly LaVigne, senior director of advanced markets at Allianz Life, says that the goal of building generational wealth is to make sure that your children and grandchildren have a better life than you did. “That provides a real comfort. ”.
What are the challenges to creating generational wealth?
Below are two challenges to keep in mind when it comes to creating generational wealth, especially for minorities: According to the Federal Reserve, there are statistics showing disparities in wealth. Black families have a median wealth of $24,100, Hispanic families have $36,100, and White families have $188,200.
Can generational wealth be a long-term financial goal?
For instance, you might be focused on getting out of debt, saving money, or pursuing other financial goals. It may be that creating generational wealth is not on your immediate priority list while you tackle your current finances. But with that being said, you can still build it into your long-term financial goals.