How to Build Generational Wealth Starting Right Now – Benzinga
Generational wealth serves many generations of your family now and long after you’re gone. To secure a financial future for your children and their children, now is the best time to learn how to build generational wealth.
According to a report from the University of Michigan, “parental wealth heavily influences children’s development and success, leading to substantial intergenerational transmission of wealth status. The odds of becoming part of the wealthiest 20 percent of Americans
are more than 700 percent greater if your parents were in the top 20 percent instead of the
bottom.” So, any actions you can take to build generational wealth will aid your children now and well into the future.
How to Build Generational Wealth
If you already have children or are considering starting a family, it’s hard to discount the benefits of building generational wealth. Here are actionable steps you can take to start building generational wealth.
1. Investing in stocks and crypto
To build net worth, most advisers recommend investing in the stock market, particularly in index funds. The upside of investing in index funds is the rapid diversification and ease of management. You can start buying low and try to sell high to try to make money through capital appreciation.
You might also concentrate on buying and holding dividend-paying stocks. Dividends are the most visible and direct way that corporations can share profits with stockholders. This feature makes dividend payments attractive to high-income investors — especially if the stock is rising, the company is producing a reliable product and investors see long-term potential in the sector, product or management team. Ideal dividend-paying stock investors are often retirees who are looking for a reliable source of income for themselves now or as an investment for their children and grandchildren.
Many people believe that cryptocurrencies are a solid substitute for centralized finance. Investing in digital assets is inherently risky because of their volatility. However, diversifying portfolios can mitigate volatility to help build long-term wealth. With Bitcoin, for instance, you can save and invest for the future. Considering Bitcoin as a hedge against the stock market could possibly work against inflation.
get started
securely through Interactive Broker’s
website
1 Minute Review
Interactive Brokers is a comprehensive trading platform that gives you access to a massive range of securities at affordable prices. You can buy assets from all around the world from the comfort of your home or office with access to over 135 global markets. Options, futures, forex and fund trading are also available, and most traders won’t pay a commission on any purchase or sale.
IBKR is geared primarily toward experienced traders and investors but now with the availability of free trades with IBKR Lite, casual traders can also acclimate to IBKR’s offerings.
Best For
Access to international markets
Active traders
Sophisticated investors
Detailed mobile app that makes trading simple
Wide range of available account types and tradeable assets
Pros
IB SmartRouting provides significant price improvement vs. industry
Fractional trading allows investing regardless of share price
Industry’s lowest margin rates
Earn more by lending your fuly-paid shares
Cons
Beginner investors might prefer a broker that offers a bit more hand-holding and educational resources
get started
securely through eToro’s
website
Disclosure: eToro USA LLC; Investments are subject to market risk, including the possible loss of principal.
1 Minute Review
eToro, headquartered in Cyprus, England and Israel, has provided forex products and other CFD derivatives to retail clients since 2007. A major eToro plus is its social trading operations, including OpenBook, which allows new clients to copy trade the platform’s best performers. Its social trading features are top notch, but eToro loses points for its lack of tradable currency pairs and underwhelming research and customer service features
Best For
U.S. based cryptocurrency traders
Investors looking to CopyTrade other traders
Simple user interface
Pros
Several major cryptocurrencies and altcoins
Expansive network of social trading features
Large client base for new traders to imitate
1 Minute Review
Webull, founded in 2017, is a mobile app-based brokerage that features commission-free stock and exchange-traded fund (ETF) trading. It’s regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
Webull offers active traders technical indicators, economic calendars, ratings from research agencies, margin trading and short-selling. Webull’s trading platform is designed for intermediate and experienced traders, although beginning traders can also benefit.
Webull is widely considered one of the best Robinhood alternatives.
Best For
Active traders
Intermediate traders
Pros
No charges to open and maintain an account
No account maintenance fees or software platform fees
Intuitive trading platform with technical and fundamental analysis tools
2. Real estate
Building generational wealth through real estate can allow you to achieve portfolio diversity, competitive tax advantages and flexibility. A long-term investment strategy sees renewed energy during stock market struggles. Nor does it stop being profitable when the stock market does well.
Real estate acts as an inflation-hedged investment when cash loses its purchasing power. Unlike cash, its value is less likely to depreciate down the line. With real estate investing, you can use options like investing in real estate investment trusts (REITs) or flipping homes.
Best For
Accredited Investors
Get started
securely through CrowdStreet’s
website
Best For
Accredited Investors
1 Minute Review
Crowdstreet is an online real estate investment platform that lets investors choose from a wide range of real estate investment offerings to crowdfund. Crowdstreet investors are free to buy into managed funds, individual buildings or even build a bespoke investment portfolio that includes both kinds of deals.
CrowdStreet’s platform has a diverse range of property types, ranging from multifamily to office, industrial, self-storage and others.
Best For
Accredited investors
Long-term investors
Investors looking to diversify from stocks
Pros
User-friendly interface
Diverse investment offerings
Great investor resources
Proven performance history
Many offerings eligible for inclusion in self-directed IRA
Cons
Accredited investors only
Most offerings require a $25,000 minimum investment
Best For
Non-accredited Investors
get started
securely through Groundfloor’s
website
Best For
Non-accredited Investors
1 Minute Review
Groundfloor is open to non-accredited investors and private individuals looking for active real estate alternative investment. Groundfloor has great volume with more than 10 investments.
Individuals with small portfolios will also like the low $10 minimum and 0 investor fees. However, most of the loans are given to house flippers, and there is a risk of borrowers defaulting on their loans.
Best For
Non-accredited investors: It is a good option for non-accredited investors who want to invest in an individual capacity.
Private investors with small portfolios: Groundfloor charges a relatively small premium of $10, which private investors with small portfolios find attractive.
Active-investors: Groundfloor is also ideal for investors who want to actively maintain and control their real estate portfolio.
Pros
Charges the lowest minimums in the industry
0 investor fees
Open to non-accredited investors
Cons
Offers no bankruptcy protection
High rate of an uncured default
Many loans are for judicial-only states
Best For
Small Account Real Estate Investing
Get started
securely through Streitwise’s
website
Best For
Small Account Real Estate Investing
1 Minute Review
Streitwise is a unique online real estate investing platform that was designed to give investors, both big and small, an equal opportunity to invest in real estate. At its core, Streitwise is a real estate investment trust, but it’s one of the few online real estate investing platforms that is available to non-accredited investors.
Best For
Investors looking to diversify
Investors with less than $200k in annual income
Passive traders
Pros
Consistent quarterly dividends
Low, transparent fees
Low investment minimum
Convenient and easy to use
3. Family business
Starting a business is risky, but that risk can yield rewards. Starting and passing down a family business could offer financial security for your family and future generations.
Family businesses have a greater chance of succeeding — over 30% of all family-owned businesses are estimated to have made it into the second generation. It’s vital that you consider a business where you’ll offer a service or product that people will continue to need.
You want to start a business that will still be pulling in consumers 100 years from now. Also, think about having your kids start working at the business from a young age to encourage a smooth transition of the business and its practices down the line.
4. Life insurance
Life insurance is a way to build wealth by using a life insurance policy as a transfer strategy to your children. A policy can cover things like funerals, mortgages, debts and daily expenses.
Not only does it cover basic needs, but you can also design it to provide future long-term benefits. While there are many types of life insurance that you can choose from, they all fall into three categories:
Term-life insurance Permanent life insuranceUniversal life insurance
A term life insurance is the most affordable.
Best For
Term life insurance
Get started
securely through Bestow Life Insurance’s
website
Disclosure: *excludes New York
Best For
Term life insurance
1 Minute Review
Bestow offers 2 kinds of life insurance policies: 20-year level term policy or a 10-year level term policy.
Through its policies, you may qualify for up to $1 million in term life insurance. That may seem like a sizeable sum, but if you have a spouse and children, you have to consider the cost of things beyond your mortgage, such as daycare and eventually college, as well as the loss of wages over time.
Bestow uses its proprietary technology to underwrite your insurance policy, so the application process is much faster than with traditional life insurance companies. They’re also backed by Munich Re and North American Company for Life and Health Insurance, 2 A+ rated insurance companies.
Best For
People who are looking for short-term life insurance
Individuals who don’t want to go through the hassle of having a medical exam or blood work done to get coverage
Pros
Plans start at just $8/month
Decent coverage options if you need insurance quickly and without hassle
Cons
Offers 2 types of plans; does not offer whole or universal life insurance policies
The 10- and 20-year plans not available to users under 21 or older than 55
Best For
Adjustable coverage
get started
securely through Ladder’s
website
Disclosure: Ladder Insurance Services, LLC (Cal. license # 0K22568; Ark. license # 3000140372) offers term life insurance policies: (i) in New York, on behalf of Allianz Life Insurance Company of New York, New York, NY (policy form # MN-26); and (ii) in all other states and the District of Columbia on behalf of Allianz Life Insurance Company of North America, Minneapolis, MN (policy form # ICC20P-AZ100 and # P-AZ100). Only Allianz Life Insurance Company of New York is authorized to issue life insurance in the state of New York. Insurance policy prices, coverages, features, terms, benefits, exclusions, limitations and available discounts vary among these insurers and are subject to qualifications. Each insurer is solely responsible for any claims and has financial responsibility for its own products.
Best For
Adjustable coverage
1 Minute Review
Ladder offers policies with no hidden fees, on-the-spot underwriting and a streamlined website. Coverage ranges from $100,000 to $8 million and you can adjust your coverage over time as needs change.
You can choose a 10, 15, 20, 25, or 30-year term. Ladder also offers up to $3 million in coverage without a medical exam — just answer a few health questions and complete the application to get an instant decision.
Ladder doesn’t impose policy, cancellation or processing fees and you can cancel at any time. Take three steps to get Ladder insurance:
You can apply for life insurance coverage with Ladder right now via the online application.
Find out whether you’re instantly approved.
Accept your offer — including affordable prices and no hidden fees.
Its price lock guarantee ensures your premium won’t increase as your health changes and you age. Policies in New York are issued by Allianz Life Insurance Company of New York and in the other states and DC by Allianz Life Insurance Company of North America. You can receive a refund within the 1st 30 days if you’re unhappy with your coverage and you can cancel at any time.
Best For
Term life insurance
Online application
Policyholders between 20 to 60 years of age
Pros
Up to $8 million in coverage
Price lock guarantee
No policy fees
30-day money-back guarantee
Adjustable coverage
Cons
No policy riders
Term life insurance only
Best For
Comparing multiple quotes to get the best price
Compare Quotes
securely through PolicyGenius’s
website
Best For
Comparing multiple quotes to get the best price
1 Minute Review
Policygenius is a great option if you want to compare cheap life insurance companies and apply for a policy all in one place.
The service could save you up to 40% with its comparison of top-rated carriers. And because Policygenius is a marketplace, not an insurance company, you can trust that you’re getting unbiased life insurance advice from their licensed experts.
Use Policygenius’ free cost calculator to help you figure out the amount of coverage you need. There are also good educational tools if you want to buy a policy on your own.
Policygenius can also help you find the best provider to build an online will and plan your estate, rounding out their life insurance resources.
Best For
Comparing policies side-by-side
Multiple coverage options
Pros
Comparison of multiple policies
Unbiased advice from licensed insurance experts
Free cost calculator
Cons
Quotes from all providers not always available
5. A will or trust
Building generational wealth through a trust or a will is a customary estate planning method to protect assets. A will is a legal document that states your final wishes on distributing your financial assets or care of your young children. On the other hand, a trust is a legal arrangement where one party, called trustor, gives another party, known as a trustee, the legal authorization of holding and transferring assets on behalf of a third party, the beneficiary.
If you decide to use a trust, be sure to understand the various types of trusts and their implications.
Testamentary trusts: You can create a testamentary trust in your will and testament, which will be functional once you die. If you want to make changes to your testamentary trust, you can only do so by changing your will.
Revocable trusts: The terms of this trust can be changed at any time by the grantor or the trustee. Income earned during the lifetime of the revocable trust is distributed to the grantor. It’s only after death that the assets or property transfers to the beneficiaries of the trust.
Irrevocable trusts: Unlike revocable trusts, the grantor in an irrevocable trust can not alter it without the beneficiary’s consent. The grantor cedes ownership of the assets stated in the trust, withdrawing all their ownership rights and saving on estate taxes.
Best For
Comprehensive estate planning
Get started
securely through How to Build Generational Wealth’s
website
Best For
Comprehensive estate planning
1 Minute Review
Trust & Will is an online-only estate planning service so there is no software to download. While it’s among the more expensive services, it’s at the same time one of the easiest to use. Trust & Will offers:
Basic wills
Comprehensive wills
Child guardianships
Pet guardianships
Unlimited updates for 1 year
Trust & Will specializes in comprehensive estate planning, as well as basic will-making. The company offers customized forms for every state and free printing and mailing of wills. There is a 25% discount for healthcare workers and their spouses.
Best For
Comprehensive estate planning
Pros
Easy-to-use
Downloadable documents
When to Start Saving and Investing?
Money doesn’t grow on trees, but it can grow when you save and invest wisely. It’s never too late to start saving and investing for your future family. Start by considering all your options and making wise choices instead of just assuming something good will happen.
Educate Your Kids
Saving and investing money is a vital life skill, but it doesn’t come easy. The best inheritance you can give your children is a good financial education. Teaching your kids can help them understand the value of money, grasp the concept of delayed gratification and guard them against unnecessary spending. Also, they’ll better understand the choices you made to get to this point.
If your kids are old enough to ask for certain things, then they’re old enough to start learning about money. A savings account is a good way for kids to develop strong financial habits. It allows your children to get the feel of having their own money to deposit.
Consider discussing the importance of budgeting and spending money on things they need versus things they want. Teach them the difference between basics and luxuries. Remember to encourage them to use cash whenever buying goods.
Frequently Asked Questions
What is the fastest way to build wealth?
1
What is the fastest way to build wealth?
asked 2022-03-11
Kathryn Hauer, CFP®
1
While there is no one-size-fits-all formula for building wealth, some general rules apply. You can increase the difference between your income and expenses and invest the difference to grow exponentially with time.
Answer Link
answered 2022-03-11
Benzinga
How much money do I need for generational wealth?
1
How much money do I need for generational wealth?
asked 2022-03-11
Kathryn Hauer, CFP®
1
There’s no magic number that can equal generational wealth. You can only achieve generational wealth after acquiring enough investments to cover your family’s day-to-day expenses without using the principal.
Answer Link
answered 2022-03-11
Benzinga
