Knowing how to create multi-generational wealth sounds like a daunting task, but it’s not as hard as you might think. Let’s take a look at what this actually involves and how you can build this kind of wealth to benefit you and your family.
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What is generational wealth?
Generational wealth is sometimes referred to as family wealth or legacy wealth. This just means enough money to support you and future generations of your family.
Leaving behind happy memories and good genes is great, but I’m sure your family would also be grateful for the money and tools to thrive.
Who can create multi-generational wealth?
There is a common misconception that your only option is to be born wealthy. This is not the case.
A 2017 survey from Fidelity found that around 88% of millionaires were self-made. This shows it’s more than realistic for you to be aiming high.
You have the ability and potential to become one of these people building substantial wealth from scratch to pass on to your family.
How can I create multi-generational wealth?
If you’re smart about it, there are plenty of ways that you can create lasting wealth for you and your family. Here are five of the most accessible and practical ways:
1. Investing
This method is now easier and cheaper than ever. If you plan well and invest consistently over your lifetime, it’s more than achievable for you to create multi-generational wealth.
The power of compound interest over time means that by playing the long game you can create enough wealth to support yourself and future generations.
Using a stocks and shares ISA is a great way to do this because you can build your investments in a tax-efficient way. Once you’ve made enough to ride off into the sunset, it will be important to do some proper estate planning.
This could involve using a financial adviser to make sure as much of your wealth as possible can be passed down to the next generation. Do keep in mind that the value of investments can go down and there’s no guarantee you’ll make money.
Please note that tax treatment depends on the specific circumstances of the individual and may be subject to change in the future.
2. Life insurance
Often overlooked, this can be a great way to build wealth for your family. It’s obviously not exciting to think about the fact that one day you’ll be gone, but it is inevitable.
If you’re clever and set up a substantial life insurance policy, this can help your family to create multi-generational wealth. Or it could be used to help pass on what you’ve built to future generations.
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3. Owning property
Property has been a highly appreciating asset over the years. Good property investments are likely to be a solid way to create and pass on wealth.
The main drawback to having wealth tied up in your home is that it’s hard to access whilst you’re living there. However, owning some quality bricks and mortar is a tried and tested way of creating multi-generational wealth. It’s an asset that can be easily transferred from generation to generation and one that will only appreciate.
4. Starting a business
Although you can very easily create substantial wealth by investing your wages smartly over a long period of time, starting a business could be an alternative.
Not everyone wants to start their own business and that’s understandable. However, for those that do, it could be a much faster way of creating wealth if you are successful.
You don’t have to be a business owner or an entrepreneur to make lots of money. But it can certainly increase your potential rewards if you know what you’re doing. Even having a side hustle that you use for passive income could free up more money to be invested elsewhere.
5. Teach your family
It’s important to remember that building wealth for your family doesn’t have to fall only on your shoulders.
Teaching your family about personal finance, money and investing is important. The more people in your inner circle that understand how to manage money, the better. This means a greater chance that you can collectively create multi-generational wealth.
