6 Actions to Take Now to Increase Wealth for the Next Generation
If your financial goals include building wealth to pass along to your next generation of family members, there are some smart steps you can take today to bolster your financial legacy and build lasting generational wealth.
#1 – Teach your kids about smart financial decision making.
One of the best ways to ensure lasting generational wealth is by teaching your children how to establish and maintain healthy money habits. Start when your children are young by offering them a monthly allowance and teaching them how to balance saving, spending and giving to others.
As they grow, start involving them in basic financial decisions. Perhaps you give them a choice between taking two smaller family vacations or saving for a larger one in the future. Or, maybe you allow them to choose a charitable organization for the family to support.
Teaching your kids smart financial habits when their young allows them to have a positive relationship with money, which can eventually lead them to be wise financial stewards of the family’s wealth.
#2 – Prioritize saving for the future.
When it comes to building generational wealth, the sooner you start saving, the better chance you will have of achieving your goals. Avoid the common mistake of saving what is left over after you pay for other expenses. Instead, include savings as a line item on your budget, and prioritize it over spending on non-essential purchases.
A great way to prioritize saving for the future is by establishing automatic transfers directly to your savings account.
#3 – Pay off debt.
When you carry debt, your financial priorities are to your creditors, not to yourself or your family. The best way to gain control over your finances and start building wealth is by paying off your debts. It is especially important to pay off high-interest debt as soon as possible, as interest and fees on outstanding debt can quickly spiral out of control if not properly managed.
Focus on paying off your highest interest loan first, then move on to the loan with the next-highest interest rate until all loans are paid off. The sooner you are out of debt, the sooner you can start building wealth.
#4 – Start investing as early as possible.
One of the most valuable tools in helping you build generational wealth is the power of compound interest. Compound interest is, essentially, the act of earning interest on your interest. The earlier you start investing, the higher your chance of generating interest, which can start earning its own interest.
#5 – Establish a strong estate plan.
Not only does an estate plan help assets pass smoothly to the next generation, it also helps limit your estate’s tax exposure and protect your family from the stressful, time consuming and expensive probate process.
Estate planning can also be an effective strategy to implement controls and rules for how money can be used by your heirs. This can help prevent one generation from spending all your money before it can be handed down to the next generation.
#6 – Create multiple income streams.
Another smart way to build multi-generational wealth is by establishing several diverse streams of income. For example, you may want to consider investing in dividend stocks, a small business and real estate in order to diversify your income. Having multiple income streams can help insulate your wealth from unexpected events and market fluctuations.
Could you use some help implementing strategies to enhance your generational wealth building potential? We would love to have a conversation. To learn more about how United Capital Financial Advisors can help you plan for the future, please contact us.
