How to Plan for Wealth that Lasts for Generations
Many people know how to build wealth. One of the most difficult challenges, though, is creating wealth and ensuring that it continues and grows throughout future generations. Did you know that 70% of families lose their wealth in the second generation?! Why is that? It is because many people don’t plan and consider the effects on their kids and beyond. Generational wealth is a definite possibility, as long as you have a strategy. Follow these steps to generational wealth, and your kids (and grandkids) will thank you.
Step 1: Teach Your Kids Financial Literacy
The key to teaching your kids about financial literacy is to start early. As soon as they begin to grasp the concepts of value and money, you can begin to build their financial literacy. There are countless opportunities to talk about money, whether it is through family game time, commercials on TV, or trips to the supermarket. Children grasp the ideas of saving, spending, and giving early in life, and parents can reinforce this learning in many ways. These are traits that can carry young kids into the teenage years and beyond, leading to financially successful adults.
Another way to teach financial literacy to your children is to be an example (a positive one!). Don’t be afraid to tell them stories, to show that you are financially literate. You can do this without bragging! Model how you save money, how you invest in the stock market, and how you give a portion of your wealth to various causes. The more your kids learn about money at a young age, the more likely your family will achieve generational wealth.
Step 2: Determine Your Family Values
One of the most critical aspects of planning for wealth that lasts for generations is your family values. Parents pass on their ideals to their children, for good or bad. Many times, we don’t realize that we are teaching our kids our beliefs and goals. But kids pick up on everything. They are watching us, imitating us, and forming value systems based on how we talk and act about money. If we can instill positive values about wealth, our kids should take these and later pass them on to their children. The result? Generational wealth!
An example of a value is the importance of giving. If giving is a significant component of your financial outlook, you can pass it on directly to your kids. Have your children learn about giving and then let them practice. They will realize that giving is a big part of financial literacy.
The same could be said about saving and spending. Some families prioritize saving, while others focus on investing as a financial strategy. These parents can show their children exactly how they accumulate wealth, how they have separate accounts for different purposes. Investing parents can demonstrate how they research stocks, mutual funds, and other investments. They can explain how investing is a proven way to build wealth, and hopefully, future generations will follow their example. This lesson is especially helpful for older kids, such as teenagers.
If you are not crystal clear on your family values, it is ok to begin to develop a set of these values – start somewhere! They will evolve. Take a seat and write down your money goals, both short-term and long-term. You can also expand to write down what you dream of for your family. Once you have all of this down on paper, your family values can begin to take shape.
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Step 3: Tell Your Stories to Your Kids
To young children, parents are the whole world. We have a lot of power (in a good way) to shape their future path. A lot of times, though, kids don’t realize what goes on behind the scenes. They may get nice Christmas presents, go on vacation, and in general, understand that their family has enough money to get by.
However, they probably don’t see the sacrifices that parents are making to create this wealth. Building wealth is not easy. It takes hard work and planning. Parents who create wealth need to implement strategies to make sure that money grows. We need to create budgets, analyze our paychecks, deal with taxes, and monitor our investments. There is a lot involved in creating wealth!
So, what to do? Well, pass it on. Kids need to know the nitty-gritty, and that wealth doesn’t appear magically. We can share with them all of the details that we deal with daily to keep the money growing. There is a process, and processes can be taught. Especially as kids get older, we can ramp up how we deliver our money knowledge to them.
One way to do this is by telling them stories. Because building wealth is challenging, it can be easy to fall into complaining. But we can’t! Instead, we can teach them the process and share with them the good stories from which they can learn.
For example, I grew up in Istanbul and came here with no knowledge of English. I had no money. Yet, I have managed to build a life here from scratch. These are the things we can tell our children about in detail, so that they can learn. Anyone can build wealth and understanding specific ways to accomplish that is essential.
The importance of following a plan
If you can follow these three steps, you will be better off than 90% of those building wealth. That is because they don’t have a plan beyond their own. Creating generational wealth takes a strategy. Teaching kids about financial literacy is so important, but so is instilling the family values that will be the foundation of the future. Tell your stories to your kids and let them see how your hard work is paying off. Show them how they will benefit from your sacrifices, and that their children and grandchildren will enjoy the results, too!
