Tips for building generational wealth

Generational wealth may conjure up images of railroad titans from the late 1800s, or today’s tech billionaires. However, generational wealth is valuable — and accessible — to a far greater number of people than you might think — including you!

We’re here to help you understand generational wealth, why it’s beneficial, and how to start building it, no matter your current financial situation.

What is generational wealth?

Talking about money and wealth was long considered rude or impolite, but that has changed as personal finance conversations entered popular culture, especially online.

Generational wealth refers to the assets and wealth passed on to your heirs (however you define that) to provide greater financial security and freedom. Your heirs may be your direct descendants — one generation out of your children, and then their children. Heirs can also be friends, the children of friends, or extended family, like nieces and nephews.

Generational wealth is about building foundations. For some individuals, it’s about giving the gift of greater financial security or freedom — strengthening a foundation that already exists. For others, it’s an effort to break the cycle of struggle or poverty, and create new opportunities for future generations.

Generational wealth considers financial wealth and other assets, including: Liquid funds, savings, and investments Assets, including real estate and valuables like art, collectibles, precious metals, and gems Business ownership Intellectual property held, including patents, copyrights, and trademarks

Why is generational wealth a good thing?

Generational wealth creates stability and a firmer financial foundation. Stability and financial flexibility make pursuing opportunities and dreams more possible.

Creating wealth for your future and the future of the people you love, through owning a home, saving and investing, and using smart financial strategies lets you and your heirs make choices based on what’s important to you and to them.

We all know that planning for your children’s futures is inherent in being a parent. Generational wealth doesn’t mean creating a world where your kids and their kids never need to work, but it can be an essential leg up in their long-term planning and opportunities. The same goes for nieces, nephews, other young relatives, or family friends with children you hope to support well into the future.

The generational impact can also extend positively throughout your community, creating benefits beyond your immediate circle. Ensuring that your heirs have the stability and ability to contribute positively to their communities, support charities important to your family, and have opportunities begins with thoughtful planning early on.

How to Start Building Generational Wealth

1. Pay down, save up, invest long-term.

   Consider your spending right now. Paying off any consumer debt (credit cards, student loans, and car loans) does more than relieve stress. It can also improve your credit score and mean having cash flow for other goals and opportunities, creating space for building wealth. As you save, you can also think about things like investing longer-term, which carries lower risks from market shifts, and puts the power of compound interest in your favor.

2. A starter home is a great place to start.

   Your dream home may be a few years down the road, but owning a home, condo, or apartment can be a great step toward building generational wealth. Whether you rent, lease, or own with a mortgage, housing is generally the largest expense in your life — at any time in life. Because homes tend to increase in value, you increase your wealth over time as you build equity. That equity can also be used through a HELOC or HELOAN, if needed.

3. Build a team and keep learning.

   Regularly connect with your banker and a team of providers — investment advisors, fiduciary, CPA, attorney. Find and follow experts whose financial values align with yours. Start with the basics, do more research, ask questions, and keep learning.

Another key to building generational wealth? Starting early and continually evaluating your estate plan. Fremont Bank’s Head of Trust & Estate Services, Leandro Vicuña , shared his myth busters on estate planning.

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Fremont Bank and its representatives do not provide tax or legal advice. Each individual’s tax and financial situation is unique. Consult your tax advisor for advice and information concerning your particular situation.

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