When anyone talks about generational wealth, most people mean wealth that lasts for generations. Wealth made in one generations and kept in the family over time, like the Rockefellers or the Johnsons.
But, there can be, actually is, another meaning – the one I choose to use. To me generational wealth means building wealth over generations. Family Money Values is all about building wealth over time – generations in fact.
Why bother to build wealth over generations?
Many of us are concerned with our busy day to day lives, making our meager paychecks last to the next pay period. Others may have sufficient income to meet expenses but want to spend any surplus enjoying their time on earth. Still others may have a real surplus but are reluctant to leave the money to future family members due to fear of ruining their drive or their lives.
So why worry about the wealth of future generations? Here are my thoughts on why you should consider it.
To carry forward the legacy of our ancestors
In America, most of us can look back to the time our ancestors first came to the country as immigrants. Why did they come? To build a better life for themselves and their descendants, which includes not only money but also freedom and the opportunity to grow. Most of these immigrants came over poor. My own grandfather came steerage through Ellis Island in the early twentieth century. He certainly wasn’t rich, but he worked hard, grew his skill as a chef and established a toehold in the country on which to build. How about your family immigrant?
To make sure our children (and their children) are better off than we were
What parent doesn’t want their child to be better off – financially, health wise and in opportunities?
None of us want spoiled rich brats in the family, but we do want to give our kids a good start in life, perhaps a better one than we had – or at least keep up with our changing, ever richer environment.
Just a couple of generations ago (one for some of us), it was common for folks to lack electricity, running water, indoor plumbing and central heat or air conditioning. My paternal grandparents lived most of their life without any of these things, but they helped my Dad position himself so that he could afford and enjoy electricity, running water, indoor plumbing and central heat Likewise, Dad and Mom helped my brother and I enough to have and enjoy central air condition, microwaves, dishwashers, automatic garage door openers and more. Each generation provided a boost to the next – building on the prior generations’ efforts.
To start a legacy of forward thinking, which could allow future generations to invent the next great thing, or save the earth from extinction
The poor may inherit the earth, but the rich are usually the ones that can change the world. Maybe your generation is dirt poor and can’t really do anything about things you see that need change. But you build wealth as best you can and raise your next generation to do the same. Eventually, a future generation will be wealthy enough to actually effect changes.
What’s your hundred year plan?
Building wealth across generations doesn’t just happen, it requires lifelong commitment, installation of a saving mentality in each generation and establishment of expectations in the family members to help out the next gen.
Studies have shown that poor people generally raise poor children and that rich people generally raise rich children. For example, a study published on The National Bureau of Economic Research site called Poor Little Rich Kids? The Determinants of the Intergenerational Transmission of Wealth, studied Swedish data on natural vs adopted children and found that the environment (as opposed to genetics) influenced whether or not the children (when grown) were also rich.
In Why rich kids become rich adults and poor kids become poor adults Author Maya Wesby says:
“From the moment a child is born into a wealthy family, their parents’ spending habits determine if they, too, will be in a high income bracket as an adult. It stems from how wealthy parents spend money compared to their low-income counterparts: where low-income families focus on immediate needs, such as food and transportation, rich families invest more on future-oriented purchases that will ensure their wellbeing.”
Have a plan to increase your and your child’s well being to to break that cycle of poor raising poor. A one generation plan is a start, but if you think past the current two generations to that third one, you will be well on the way to building a wealthier future family. Your plan doesn’t necessarily have to be about getting money, it can be about giving the kids more opportunities, better examples, increased education and etc. These things can result in your kids getting a better start, allowing them to make more and save more and build their generation’s wealth.
Getting rich quick is not the right plan.
Even though you decide to do things differently than your parents, your natural tendency is to think and act in familiar ways. You grew up watching parents say and do certain things certain ways. Maybe you thought they were great and want to do the same, or maybe you have decided that change is needed.
You must make a conscious decision, have a plan, if you want to succeed in making that change. Even if all you want to do is carry forward an already established legacy of wealth building, you need a plan to protect and grow your generation’s efforts.
Your plan needs to include training yourself and your children to save, to live healthy lives, to surround yourself with better quality – better neighbors, better schools, safer areas to live, more activities for kids to explore and etc.
Your plan shouldn’t be all about how to get rich fast.
Most of us won’t succeed in getting rich quick. But all of us can succeed with a get rich slow approach. We can all incrementally increase our family wealth, knowledge, contacts, lifestyle and education with each generation.
My family is doing it.
That immigrant grandfather landed a position as head chef in a hotel. He married a woman with several brothers and sisters, none of whom married. They worked hard, saved, survived the depression and supported those brothers and sisters when needed. The brothers and sisters also worked hard and save and one of them invested. My grandparents inherited money from those brothers and sisters. They used it, along with their own earnings, to provide a better quality life for their three daughters.
One of those daughters married and had two children. She and her spouse became savers and eventually investors. They inherited both money and opportunity from her parents and her aunts and uncles. They used it to provide college money for my brother and I and to help us get started in our chosen lives. They instilled the work hard save well mentality in me. By the time I married, my parents had risen from working class to middle class on the American economic scale.
I used the education, training and habits they instilled in me to find a well paying career. As a result, I was able to earn and save. When they passed, they left assets to my brother and I and to our children. My spouse and I tried to instill that same work hard save well mentality in our two boys.
One of them is well on the way to becoming a self made millionaire in his forties. We are working together to train his two children to work hard, save money, invest smartly and start their own businesses.
If my family can do it, so can yours. Family Money Values is here to help you figure out how.