Creating generational wealth is a goal we often hear expressed by many, but families frequently do not have conversations about it or how to grow and sustain that wealth. Generational wealth refers to the wealth and assets that are passed down from one generation to the next within a family or community. This type of wealth is accumulated and built over time and can include financial assets such as property, businesses, stocks, and other investments.
Creating wealth is not simply about accumulating assets; it is about building momentum that carries into the next generation. Even a modest portfolio, handled with intention and discipline, can provide your children with a powerful foundation and a better place from which to grow.
Generational wealth can break cycles of strife and poverty and alleviate each generation from starting over from scratch. Building generational wealth isn’t just about money, it’s about clarity, alignment, and shared vision. Families who successfully create lasting wealth don’t avoid financial conversations; they normalize them.
The first step to build this wealth is a frank conversation of what wealth means to each member of the family. Is it financial independence? Accumulating assets and if so which category of assets? Funding education or being able to afford creature comforts? When these are aligned then you can ultimately begin to set SMART goals to achieve the aligned vision.
You don’t need to have a high net worth or wait until you have accumulated a vast fortune to think about passing on wealth. Starting early and giving yourself time is most important. The next step after aligning goals is to seek sound financial advice and help from a licensed advisor. An advisor can help you create a measured portfolio that should consider any debt, the goals you have and the respective timelines to achieve your long-term goals. With the help of your advisor, you should aim to create a diversified portfolio that manages risk while aiming for long-term growth.
As your long-term wealth grows, never forget the power of compounding interest. Many think of it as a buzzword but it truly is a pillar of wealth creation. As your family’s asset base grows you must also remember to protect your wealth. Without preparation and due diligence your hard-earned wealth can be eroded and destroyed. Advocate for all family members to be financially literate so they understand and feel empowered in their decision making.
Protecting your wealth also includes asset protection. Estate planning is equally important in preserving generational wealth. Where possible ensure that assets are insured and learn what asset protection strategies are available to you. Do not shy away from conversations that include topics such as the creation of a will, trusts, and financial directives for the next generation.
Creating generational wealth does not happen overnight. It is created based on clearly defined choices, where families are practical and disciplined. By ensuring your family has good money habits, is intentional with their financial literacy and makes smart goals with the help of licensed professionals you can create opportunities and stability for generations to come.
Christine Rankine is Assistant Vice-President -Personal Financial Planning at Sterling Asset Management. Sterling provides financial advice and instruments in U.S. dollars and other hard currencies to the corporate, individual and institutional investor. Visit our website at www.sterling.com.jmÂ
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