It’s no secret that the more money you have, the easier your life gets. You can afford more things, try more experiences and even free yourself from menial chores. However, the biggest advantage of wealth is that it can make the lives of your children and their children easier, thanks to a concept called generational wealth.
What is Generational Wealth?
Generational wealth, as you might suspect, is wealth that gets passed down from one generation to the next. This can take several forms, from money in a savings account to stocks and even real estate. People may also refer to this as family wealth or legacy wealth.
Why is Generational Wealth Important?
Generational wealth can give your children, and potentially even their children, a huge benefit over other families. One of the biggest benefits is that it lets your children attend college without having to take on many, if any, student loans. As a result, your children don’t have to go into debt to get a college degree, and they can use the money they saved to build up their personal finances while other college graduates are stuck paying off thousands of dollars in student loan debt.
Generational wealth can even play a role in shaping a child’s mindset. If you don’t have to worry about paying for college, you can shift your focus from what college is the most affordable and instead focus on getting into a prestigious university.
Of course, the advantages of generational wealth don’t end once a child has graduated college. For instance, you can buy a nicer house than the one your parents had by using the equity of their old home to finance a new one, or you could even use the equity in your parents’ house to renovate it and significantly raise its value.
How can I Build Generational Wealth?
The best part about generational wealth is that it’s not an advantage reserved solely for rich folks. Granted, building generational wealth is harder if you’re not rich, but it can be done.
If you want to build generational wealth, the first thing you need to do is make sure your personal finances are rock solid. In other words, you’ll need to have your emergency fund completely built up, have a goal for your retirement plan that you’ll be able to achieve and create a monthly budget that ensures all your bills are getting paid on time. It’s also a good idea to be carrying as little debt as possible.
Once you’ve got your finances secured, your next step should be putting aside money for your child’s college education in a Coverdell ESA. Even if you can’t save up for all your child’s expenses, any financial aid you give them is less money they’ll have to repay.
Another good way to build generational wealth is by buying a house if you don’t already have one. Admittedly, buying a house is a huge expense, and the steps you have to go through can be daunting, but the advantages far outweigh the drawbacks.
When you make a payment on a house, you’re building up your equity, as opposed to renting from a landlord. Even better, your property is almost always going to rise in value, making your home an investment that you’ll eventually pass along to your children.
Build up Generational Wealth With First Alliance Credit Union
Generational wealth can be a game-changer for generations to come. It can save your children from debt and allow them to access financial assets that can give them a significant advantage that lasts their whole life. While the wealthy may have an easier time building generational wealth, it’s still possible for most people.
If you want to build your own generational wealth, become a member of First Alliance Credit Union today. In addition to using our guides to build up your savings and create a monthly budget, you can also open a Coverdell ESA, invest in a Certificate of Deposit, or even get a mortgage to buy your first home.