Build Generational Wealth

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We often think of the next generations as our own children; however, it can also include our extended family, our neighborhoods, causes or organizations we care about, or even the culture we come from. The decisions we make today to grow our wealth have an impact on those who come after us. This is the concept of generational wealth.

Building wealth may not be the foundational goal that motivated most of us to choose jobs in public service-oriented professions, but that doesn’t mean we aren’t pursuing holistic wealth in our lives. There are many things in our lives that make us rich (money is one, but only one), and we have an opportunity to pass these riches on to the next generation.

We often think of the next generations as our own children; however, it can also include our extended family, our neighborhoods, causes or organizations we care about, or even the culture we come from. The decisions we make today to grow our wealth have an impact on those who come after us. This is the concept of generational wealth.

Let’s get into the what, when, how, where, and why’s that relate to generational wealth.

What is generational wealth?

Generational wealth refers to any kind of asset that families pass down to their children or grandchildren, whether in the form of cash, investment funds, stocks and bonds, properties, or even entire companies. You may also hear it referred to as “family wealth” or “legacy wealth.”

Alex Orozco, Design Lead at the Beans, says, “you can see the value of generational wealth if you yourself are starting from scratch with your finances or starting out with a large student debt burden.”  You may feel like you’re starting out behind.  Surprise: It’s not just a feeling.  There are facts to back that up.  Millennials, who are the biggest generation in the workforce, control only 5% of the wealth in the United States. In order to match what the baby boomers had at our age, we would have to quadruple our wealth.  No small mountain, right?

But it’s not just about money.  Wealth encompasses so much more than finances.  What we “pass on” can be even more than dollars:

  • Education
  • Values
  • Principles
  • Habits
  • Skills
  • Family businesses

Why is it important?

For Malcolm, a teacher in his mid-20s living in Atlanta, generational wealth is everything.  It’s not just about having money.  It’s about reversing a systemic pattern: “Growing up as a black boy in Chicago and understanding the historical context of people like me, we didn’t really have much generational wealth. I didn’t really come from anything. And also it’s the same for my parents and…beyond them…I constantly think about me being that person to start to build that legacy that we were denied for hundreds of years.” 

Real estate is one of the most common avenues of generating generational wealth. While homeownership is on the rise across the board, Black Americans still have the lowest rate of homeownership compared to other racial groups. According to data from the U.S. Census Bureau, white Americans have a homeownership rate of 76%, Hispanic Americans have a homeownership rate of 51.4% and Asian, Native Hawaiian and Pacific Islanders have a homeownership rate of 61.4%. That’s compared to the 46.4% homeownership rate for Black Americans. 

Malcom and others are on the path to change this narrative and create a legacy for their families. They’re doing it by making plans for their financial futures and aligning their actions with their intentions. 

Many people may feel that generational wealth is only accessible to a privileged few, but it is truly within reach. 

Where do you begin?

When you’ve only seen yourself in a paycheck-to-paycheck reality, it can be tough to determine where to begin. Here are some tips to consider:

  • It’s as simple as making the choice. If you have kids or plan to have kids, then you may start to think about how their financial futures will play out. There may also be a community or cause you’d like to support.When you have made the choice that you want to build generational wealth, you have taken the first step. 
  • Consider sitting in a quiet place with your notebook and pen or pencil and think about what building generational wealth would mean to you. Take inventory of your values.  This simple exercise can help you uncover the motivations and desires that drive you to prioritize generational wealth.
  • If you’re unclear on your overall strategy at this point, simply begin saving cash that you don’t intend to spend in retirement. Setting up a separate account for these funds can help you stay on track. 
  • Look into planning for life insurance and make sure that you’ve established a will to plan for your future.
  • Businesses in The Beans Community, like My Home Pathway, are focused on changing these trends and can be helpful to anyone who is looking to purchase their first home. They guide first time home buyers to approval faster so you can start building wealth through your home’s equity.

How do you ensure that your wealth doesn’t stop in the next generation?

When we think of reversing cycles of generational poverty and creating a future of generational wealth, it is important not to forget that there’s no guarantee the wealth will continue beyond the next generation. That is why it is so important to consider passing on values and education.  Malcolm says, “I think we highly underestimate the investment in our own children’s education. You have to teach your kids (or the people you are leaving the money to) how to manage…how to effectively utilize the money.”

He shares a statistic: only 30% of family businesses make it to the next generation.  

Now may be the time to consider not only how to make generational wealth a part of your future but also to figure out how to prevent it from stopping with you.