Most of the western world is bankrupt in their thinking. Generational Wealth is a term we should all know and understand. For most families on the western hemisphere this is an uncommon mindset but, if you examine the eastern parts of the globe you will find examples of generational wealth spanning century’s and not just cycles.
A simple definition of generational wealth is ‘the passing down of stable, significant financial resources to future generations’.
Here are 3 Tips To Create, Build, And Protect Your Family’s Generational Wealth.
Tip #1 – Build Wealth In Something That Holds Or Increases In Value
Physical assets like land, art, and gold, outlast and outperform riskier paper assets like stocks and bonds. Indeed, stocks can perform well for long periods however; stocks, bonds, and even cash all involve some claim on a third party. Every paper currency in the history of the world has eventually proved worthless and there is little reason to believe the reigning paper money champions of today: the US dollar, euro, or yen will prove different.
By virtue, the value of land, art, and gold, are intrinsic. Absolutely some liquidity is needed for day-to-day expenses but, in these physical holdings there are no issuers who can suddenly make your land disappear or turn your gold into confetti.
Tip #2 – To Protect Generational Wealth, DON’T Divide It
Different personalities equal different investing ideas. Generally speaking, when mom and dad die, their assets are divided among the children. When family assets are split up each child has the power to do with their share as they please but, all too often the financial discipline of mom and dad is not an inherited trait and fortunes typically change.
When the assets remain intact and are managed as if they were a company, families will view their wealth differently and might not hesitate making a $5 million investment. As assets pass down the generations, each generation does not view the assets as “theirs” but rather views themselves as guardians of something greater.
Tip # 3 – Foster Attitudes Of “Wealth” In The Next Generation
Once you’ve attained your wealth (or while creating it) talk to your children on how you made it; why you made it; and what you want done with it once you pass it on. Also, consider delaying the transfer of wealth until after age 30. This allows for kids to earn their own success rather than having feelings of entitlement.
Conversations of wealth with your heirs (children) should be a regular occurrence around the dinner table. This will also afford you the opportunity to “evaluate” whether or not they are suitable to carry on your fortune.
In today’s economy it’s imperative to educate yourself on ways to create, build and protect your wealth. If done properly you too can have generational wealth for your family.