OPINION: It can be exceedingly hard to pass on generational wealth -- here are some strategies that can help you do it. 1. Invest in stocks 2. Invest in real estate 3. Save money strategically
By definition, generational wealth represents assets passed down from one generation to the next. If you can leave behind a notable inheritance to your descendants, that constitutes generational wealth. These assets can include real estate, stock market investments, a business, or anything else which contains monetary value.
To generate wealth you can pass on, you need to acquire assets or save money you won’t need to spend in retirement. You then pass down the money and assets to children or other younger relatives. You can make money from stocks through capital appreciation and income from dividends. For the former, you follow the tried-and-true investing advice of buying low and selling high. For the latter, you earn these passively when the index funds send the distributions to your brokerage account
However, while almost 70% of family businesses state they want to pass the company to the next generation, only about 30% are successful in doing so. Businesses can be very profitable long-term, but it’s crucial that whoever takes over the business has interest in the industry and knows how to operate a business. How to pass down generational wealth
About half of all inherited money is spent or lost investing poorly, with the other half saved. Furthermore, Chris Heilmann, U.S. Trust’s chief fiduciary executive, states, “Looking at the numbers, 78% feel the next generation is not financially responsible enough to handle inheritance.” In other words, giving people money isn’t enough. You need to ensure they have financial literacy.
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