In 1962, Sam and Bud Walton established Walmart, a business that would go on to generate great wealth for the family. Several decades on, the Waltons family is the wealthiest in the world, with a net worth of over $200 billion.
This folks is true generational wealth.
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What are you doing to create wealth that will last several generations?
Everyone dreams of building multi-generational wealth. Unfortunately, for many people, it remains just that, a dream. That’s because wealth creation takes hard work, skill, patience, and perhaps even some luck.
In this guide, we’re sharing a few strategies that can help you in your quest to build great riches for your family.
1. Shift Your Mindset
Many people want to build wealth, but they don’t really make plans to ensure the wealth outlasts them. You’ve seen people make great fortune and blow it all up in a few years. It’s not that these people didn’t want the money to pass on to their grandchildren; they just didn’t think it’d run out that quickly.
That’s why you must change your mindset when you want to build family wealth. You must embrace the idea that when you plant a tree, you may not necessarily be the one who will enjoy sitting in its shade.
Think of the tree as an investment you make today. When you have the mindset of creating generational wealth, you’ll let the investment keep growing for several years. You’ll know that while you may not live long enough to see the investment turn into a fortune, your decedents will do.
2. Protect Yourself from Financial Liability
Financial liability can suck money out of your pocket faster than you can earn it back.
For example, if you’re the sole proprietor of a thriving business, premises liability and employee injury claims can set you back tens of thousands of dollars every year if you don’t take steps to protect yourself and your business.
Or, if you develop a chronic disease, you may spend all your money on medical expenses. In fact, medical bills are the leading cause of individual bankruptcies in the United States.
As such, actively protecting yourself from financial liability is an effective strategy for preserving your wealth.
So, how do you minimize or avoid financial liability? Get insured.
There are different types of insurance policies that provide liability coverage. Medical insurance is a must-have, and if you’re a business owner, get general liability insurance, workers’ comp insurance, and product/professional service liability insurance.
3. Protect Your Loved Ones from Financial Distress
Do you have people who depend on you financially? If yes, how will they survive if you pass on tomorrow?
This is an uncomfortable question, but one that you must confront. You’re hard at work building generational wealth, and you don’t want it to evaporate soon after your death.
If they start liquidating your assets just to meet their everyday financial needs, the wealth you accumulated in your lifetime won’t last long. Yet true family wealth lives on and on, possibly in perpetuity.
To protect your family from financial distress, there are various tools at your disposal. The best one is life insurance.
The best of them all is life insurance. Whole life insurance, in particular.
This policy remains valid throughout the insured’s life as long as premiums are paid. Upon the insured’s death, beneficiaries receive the death benefit amount. With these funds, your loved ones will settle their bills, thus negating the need to sell or liquidate your investments.
Keep in mind that whole life insurance plays a key role in the concept of Infinite Banking. Because of its cash value component, you can use the policy to save money and borrow at low-interest rates.
4. Make Long-Term Investments
There are a few paths to generational wealth.
You could win a mega jackpot, start a business, pursue a high-paying career, or be an investor. Each of these paths has varying levels of success.
Winning a mega jackpot, for example, isn’t something even those who’re born lucky think they can achieve. Starting a successful business is incredibly difficult, and jobs that pay life-changing money are few and far between.
Investing is the only option that’s accessible to anyone who wants to do it. But to use investing as a tool for generating generational wealth, you must think long-term. Find assets that will gain value and deliver returns over a long period of time.
Let’s take an example of the stock market.
A $100,000 in Amazon stock during its IPO launch in 1997 ($18 per share) would be worth about $160 million in 2023. Only a patient investor with a long-term approach would let the investment balloon this much; otherwise, a short-term-minded investor will sell the stock after a few months or years and pocket the profits.
Besides the stock market, government-issued securities and real estate are other ideal long-term investments to have on your wealth portfolio.
5. Have an Estate Plan
70 percent of wealthy families lose their wealth by the second generation. One of the reasons behind this is a lack of an elaborate estate plan. Don’t let this undo your hard work.
Estate planning is the process of deliberately arranging for the disposal of your estate when you’re no more. If you die intestate (without a will), your family may start fighting over your wealth, and it will be up to the court to determine its distribution. And if you die with a weak plan, your prized assets may end up in the hands of people who won’t protect them.
When you’re building generational wealth, you must have an estate plan that will enable the wealth to live on. If you don’t trust your beneficiaries to protect your wealth, for instance, you can create a trust. This puts your assets in the hands of a trustee who will oversee the assets on behalf of your beneficiaries.
Generational Wealth Is Within Reach
Building generational wealth is one of the best things you can do for your bloodline. Although you’ll be long dead, your great-grandkids will be thankful for the gift of financial security, freedom, or independence your wealth will grant them.
For that to happen, though, you must put in the work now. Use these strategies to create, grow, and protect your wealth.
The finance section of our blog has more personal finance advice. Keep browsing!