How to build generational wealth (p.s. it’s not too late to start!)
Written by Elisa Franco, Digital Marketing Director at EvoShare
Families and individuals from all walks of life aspire to build wealth. Especially those in low to moderate earning households, but where to start?
Acknowledging that low to moderate earning households have goals for holding and building wealth is where we begin. Disregarding this simple truth limits societal productivity, personal satisfaction levels, and economic growth.
Together, we’re challenging the ancient assumption of who can and should build wealth, and understanding how households can accomplish this is the first step to helping families share in prosperity. It’s the start of looking at wealth and finances with a holistic point of view.
In The State of Financial Security 2020, the Aspen Financial Security Program identified the urgent need for a new wealth agenda in the United States, grounded in the perspective that “the ultimate goal of the financial security field is not to help families merely better manage scarcity, but to truly create conditions of security and well-being that will enable full participation, agency, and dignity—not just in our economy, but in our democracy.”
Slowly but surely…
The term “generational wealth” refers to assets passed from one generation of a family to another. Those assets can include:
- Real estate
- Family businesses
Generational wealth is much more than just income or assets; it’s important to take inventory of all the ways one can be considered wealthy.
On top of the 5 suggested methods listed below, stop and take a moment to think about the intangible generational wealth you already have, such as: food recipes, culture, values, morals, and ancestral knowledge, just to name a few.
This perspective is necessary as many individuals find it difficult to feel worthy of building generational wealth, but you do deserve to improve you and your family’s life, regardless of your income.
If looking at investments at this stage in your financial journey feels premature, take a look at this article here about setting financial goals.
Five enabling conditions…
…that can support people’s efforts to build and maintain wealth according to The Aspen Institute:
- Investable money. To make wealth-building investments, households must first have investable sums set aside that they can use toward wealth building and asset purchases. This is different from the short-term cash flow and liquid savings that households need for basic necessities and routine money management. Instead, these are supplemental funds that could be invested for wealth building purposes without putting those routine expenses and immediate needs on hold.
- Access to affordable assets to purchase. People must have wealth-building options available—such as access to financial investments, real estate, or business assets for purchase—that are affordable, high-quality, and that meet their needs.
- For assets that require financing, access to consumer-friendly financing options. Not all assets can be purchased outright. For larger purchases like a vehicle or a property or investments in education, many families need access to safe and affordable financing to supplement their investable money and make that purchase or investment. Part of having access to this high-quality financing requires having a good credit score.
- Information and confidence about one’s ability to navigate investment and wealth building decisions. People must have access to the knowledge and skills needed to confidently navigate the asset purchasing process, which can be complex and feel overwhelming. Moreover, people must be able to see themselves as investors to engage in these processes. This information on its own is inadequate to build wealth, but it is important for people to have that information available and to identify themselves as someone who can engage in these processes; the lack of these two aspects is disempowering, and may stymie or stop people from engaging in certain wealth building efforts.
- Wealth protection. After purchasing and building up wealth-creating assets, people must also have the ability to maintain and protect their wealth from loss. Decades of wealth-stripping policies have hurt families and chipped away at their wealth, especially Black and Brown families, demonstrating how essential these protections are. Wealth protection is also about managing risk—longevity risk, health risk, market risk, interest rate risk, real estate market risk, and increasingly, climate risk. Examples of wealth protection include different forms of insurance and laws that protect consumers against predatory practices and regulate financial services.
In conclusion, keep in mind that this is a long-term strategy, one which will require dedication and commitment.
For further assistance in managing your financial wellbeing, consider TrueConnect’s Financial Wellness Platform. To learn more about TrueConnect’s Financial Wellness Platform, with access to financial advisors, let’s schedule a call. Contact us and we’ll reach out to you soon.