There is a saying that goes, “It doesn’t matter where you start, it matters where you end up.” For some aspects of life, that saying might very well be true. But when it comes to financial health and well-being, where you start matters a lot.
Many of us know firsthand the challenges that come with starting and getting through life without a strong financial foundation to stand on. Often, that drives us to find and create opportunities for our children to start from a better position than we did – because where they start really does matter. We refer to this as generational financial security or generational wealth-building.
What is generational wealth? Generational wealth is any assets passed down by one generation of a family to another.
Generational wealth looks different and unique for every family based on many factors. In a perfect world, each family would be able to secure an investment portfolio to provide that security. However, since we don’t live in a perfect world, here are a few simple steps and financial products that can help you get future generations off to a comfortable financial start.
3 Simple Ways To Build Generational Wealth
- Change your mindset. Recognize that building this base means laying the foundation brick by brick. That means one step at a time. It’s not about how much you start with, it’s about making up your mind to get started.
- Create a budget. You can read our previous post, Getting Started With a Budget, for the steps to accomplish this.
- Pay down debt. Reducing and eliminating debt will free up cash that can be saved or turned into assets.
Generational Wealth-Building Products
Once your spending, saving and debt plans are in place, you can start to research which generational wealth-building products might benefit you the most. Here are a few examples:
- Homeownership. Historically, homeownership has proven to be an effective means of building wealth by creating equity (the value of what you own).
- Child savings accounts. Start saving for your child’s future. These accounts usually carry no fees and a minimum starting balance. Deposits can be made by parents, family or the child themselves. Additionally, getting the children involved in the savings plan process will provide them a valuable financial education on banking, and it give them a sense of ownership and accomplishment.
- 529 college plans. Start saving for your child’s college expenses. Savings from a 529 college plan can be withdrawn tax-free to cover almost any type of college expense and there are usually other state and federal tax benefits.
- Custodial account These are a type of tax beneficial investment vehicle that enables an adult to set up an investment account on behalf of a child beneficiary.
- Life insurance. This product is key to the family’s ability to pay off debt and pass wealth to the next generation.
- Estate planning. The written plan to distribute assets to the next generation with the smallest burden and best efficiency (usually to avoid probate or legal system).
No matter where you are in your financial journey, we are available to answer your questions and get you on the path to financial wellness, now and in the future.
ProMedica Financial Opportunity Center (FOC) offers free financial coaching in a group and one-on-one setting to people of all zip codes and incomes. All FOC coaches are also trained in the Accenture career success curriculum to assist clients in achieving their employment goals. Sign up for an in-person or virtual financial coaching session. Contact ProMedica Ebeid Center for more information at 567-585-0059 or foc@promedica.org.
