Generational wealth or inter-generational wealth is a concept that you've possibly heard before. Typically, it refers to wealth passed down through generations. Since humans began claiming land, then money, then things, the goal has been pretty much the same. Acquire and retain assets (wealth) to pass down to future generations.
Sounds great, right? So why aren't more people doing it?
With so many recommendations out there about what people should be doing with their money, it can be hard to know which option is right for you. For many years the reigning advice was that every person needed to buy their own home and then an investment property. Buying property was where profitability was at. And then with financial crashes and unstable market conditions, the focus has shifted to simply ensuring that come retirement, life will be comfortable. Ensuring future generations are looked after has perhaps had to become a secondary priority during this time.
While there is absolutely nothing wrong with looking out for ourselves, there are options to develop generational wealth which you may want to consider.
Re-Thinking the Concept of Generational Wealth
For centuries this idea has really centred around a responsible person working hard to build assets for themselves and their immediate offspring. Parents and grandparents across the world have worked hard to ensure that they can afford to give their children all the opportunities they need to succeed. University costs paid, assistance with house deposits, and if they've been lucky, a nice inheritance to pass on.
Thankfully, no matter where you are today -- your teens, 30s or 70s --, you can begin to develop wealth. And you don't need to build a business or property empire to do so.
Generational Wealth in the Modern Age
It's been proven time and again that those who are lucky enough to inherit generational wealth end up with significant financial advantages over those who don't. This leads to them having greater education advantages, better job prospects, higher earning capacity and they're more likely to continue passing on the same kind of wealth that they were able to benefit from.
Whether or not you have benefited from generational wealth, it's never too late to create it for your future generations.
While you may have your estate (house, cars, antiques etc) to pass onto your children or grandchildren, you could also look at investing your savings into long-term investment portfolios that will continue to appreciate in value, which your children can then inherit as a portfolio, already set up to continue growing.
Building wealth at this age requires equal parts smart investments and smart planning. Parents should not only look at what investments they can make for long-term gains, but they should look at financial planning to understand what they need in order to retire. For example, how best to manage taxes, pension planning, and considering life insurance and income protection so that family will be looked after in the event of an accident or death. Planning now means that you have time to reach your financial goals for retirement, while also generating wealth that can be passed onto your children.
View our presentation on pensions ‘Pensions A Tool For Life’
A lot of families will start a savings account that is specifically aimed at providing for the higher costs their children will incur, such as school fees, University fees, first cars, first home deposits, and so on. As part of this financial planning for children or grandchildren, it is a good idea that parents or grandparents should consider a Junior ISA (JISA) account. This is a long-term savings account which appreciates in value and is unable to be accessed until the child turns 18.
For more information on JISA’s please read our blog post
As you can see, there are many options today to make your money work smarter for you. You don't need to build a business or make huge investments. You can simply start with what you have and watch your money grow.
Wise Investment specialises in long-term financial planning, helping our clients not only to find the right investments but also finding the right plan that designs the results that they want to achieve for optimal wealth creation.
Contact us today to learn how we can help you develop generational wealth.
The above information is for educational purposes only and is not a personal recommendation or investment advice. If you’re unsure about the suitability of a particular investment, you should speak to an authorised financial adviser. As you probably know, the value of investments and the income from them can go down as well as up, so you might not get back the amount you invest.
We’ve made every effort to ensure the information above is accurate. Content is based on our understanding of current law and practice at the time of writing, which could alter as a result of future legislation. ISA limits are subject to change and the favourable tax treatment given to ISAs may not be maintained in the future. Tax treatment may depend on your individual circumstances. This article is aimed at UK residents.
Wise Investment is authorised and regulated by the Financial Conduct Authority. Our FCA number is 230553. Registered Office: The Great Barn, Chalford Park Barns, Oxford Road, Chipping Norton, Oxfordshire, OX7 5QR. Registered in England 4970458.