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Financial Education

A quick intro on generational wealth building

April 02, 2024 | 5 min read

In this article

  • The importance of financial education: Equip your family with essential money management skills for long-term financial well-being.
  • Instill good financial habits: Instill habits of saving, responsible spending and budgeting early on.
  • Estate planning is crucial: Minimize potential issues by crafting a comprehensive estate plan with a trusted financial advisor.

In an ever-evolving financial landscape, ensuring a prosperous future for yourself and your loved ones is more important than ever. But to do that, you must think beyond just accumulating money today. Building generational wealth is a comprehensive strategy that spans lifetimes, creating a family legacy that extends beyond the immediate horizon. And to do that, you must build a foundation for financial values long before any money changes hands. 

Undoubtedly, this is an intricate process that involves careful and deliberate action. But don’t worry. Here, we will unravel the specifics of generational wealth and provide some high-level strategies to help you get started toward a stronger financial foundation with potential opportunities for success.

The key principles of building generational wealth

Ensuring the preservation and growth of assets over generations begins with a few fundamental things. Let’s break them down. 

1.    Financial education and literacy
Financial literacy is your ability to understand and effectively use various money-management skills like budgeting, saving and investing — and it’s not something that necessarily comes naturally to a lot of people. It takes a combination of time and life experience to master. Also,  even if you have a handle on it, your family members may not. By helping them learn the basic principles of financial literacy and becoming financially independent, you lay the groundwork for a strong financial future. When they grasp these essential concepts, they become better equipped to make informed decisions, safeguard the family's financial interests and contribute to the enduring legacy of prosperity you're striving to create.
2.    Strong financial habits
It is essential to understand that in order to build generational wealth, you must start by accruing money. For that to happen, cultivating consistent financial habits and setting SMART financial goals can become the bedrock of lasting prosperity. By adopting responsible behaviors such as saving a portion of your income every month, steering clear of debt traps and living a lifestyle within your means, you lay the groundwork for steady wealth accumulation over time. These habits act as the small yet powerful bricks in your fortress of generational wealth, shielding it from instability and nurturing its growth for the benefit of your family's future.
3.    Entrepreneurism
Though this may sound like a lofty term reserved for the elite, at its core, entrepreneurship is simply the art of identifying opportunities, solving problems and creating value — skills that transcend industries and sectors. Embracing an entrepreneurial mindset within your family not only opens doors to financial growth but also paves the way for unique opportunities. From launching a small venture to exploring innovative avenues, fostering an entrepreneurial spirit encourages family members to think creatively, adapt to changing landscapes, and take the lead in their financial destinies.

4.    Securing appreciable assets
Even with a job that provides a steady income, building generational wealth requires that you think beyond routine income sources — and the best way to do that is by securing appreciable assets because they have the remarkable ability to increase in value over time. And that means you have a foundation for lasting prosperity. Whether it's through real estate investments, small businesses or other ventures, the act of acquiring assets with potential for appreciation aligns seamlessly with your plan of safeguarding and growing wealth for the future. It’s a deliberate move that not only diversifies the family's financial portfolio but also creates a wealth of opportunities that can endure across generations.

5.    Solid estate planning
Building wealth is one thing … transferring it is another. And that’s why rock-solid estate planning is critical. Beyond the immediate pursuit of financial security, estate planning serves as the compass that guides the seamless transfer of wealth to your heirs. This deliberate preparation not only minimizes potential complications and legal issues but also upholds your intention of leaving a meaningful legacy. The act of passing down assets, knowledge and opportunities ensures that your family's hard-earned success isn't just a fleeting moment, but an enduring gift that enriches the lives of everyone. Work with a knowledgeable estate planning specialist to establish a plan designed to help safeguard your family's financial interests and secure a promising future.

6.    Education fund planning
Of all the things you can potentially impart to the younger members of your family, put opportunity at the top of the list. For that, education is critical. So, while you are making your plan for generational wealth, do not overlook education fund planning. By proactively setting aside resources for education, you pave the way for brighter futures, helping to ease the financial burden that comes with higher learning. To that end, consider exploring a 529 plan — a tax-deferred, state-sponsored investment plan that enables you to save money now for future education expenses. By investing in the educational aspirations of the next generation, you lay the groundwork for a family legacy of success. 

The future is bright

Building generational wealth is not something that happens overnight — it is a long journey that takes a lot of diligence and planning. But honoring these basic principles is a perfect place to start: Cultivate financial education and literacy, foster strong financial habits, embrace entrepreneurship, secure appreciable assets, execute solid estate planning and plan for education funds. By taking proactive steps every day, you sow the seeds of prosperity that may flourish for generations to come. Remember that this is not merely about the accumulation of personal wealth but rather enriching the lives of your family members well into the future. It’s a commitment to a future of financial security, empowerment and boundless potential.

Need help planning for your future? Our Wills & Trusts team can help! Learn more today.

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The material presented here is for educational purposes only and is not intended to be used as financial, investment or legal advice.

Any opinions are those of Desert Financial Credit Union and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or less regardless of strategy selected.

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