Recent studies have proven there is a staggering disadvantage in generational wealth between African-American homes, in comparison to caucasian households. Historically speaking, generational wealth has mostly been an advantage for white families. It gives their children a head start socially, economically, and otherwise. If their children have any ideas, they can easily get the financial muscle to drive them to reality. The big question is, how can Black families create generational wealth?
While gentrification, redlining, and credit discrimination stack up against Black families, there are still many innovative ways for Africans to build their own empire and pursue every opportunity in their own way. So, what exactly is generational wealth and how do we build it for the future of our families?
What Is Generational Wealth?
Generational wealth is financial investments that are passed on to the family’s younger generations. The major parts of generational wealth that get passed down are the likes of assets, property, businesses, and life policies from the deceased. Families who leave an inheritance to their future generations provide their dependents with an advantage to succeed in their own futures.
How Much Money Is Needed For Generational Wealth?
According to Charles Schwab’s annual Modern Wealth Survey, $2.3 million dollars is the benchmark to be considered rich in the USA. However, this is a small amount compared to what is considered generational wealth in 2021. The average amount required to support the next generation (and beyond) is now in the region of $10 million—although this amount cannot be measured by cash alone. You’ll need to consider real estate and other assets, too.
How Long Should Generational Wealth Last?
Typically speaking, generational wealth should last up to three generations—and more. However, it is strongly advised to seek financial advice to assure that the funds are well used down the line. You’ll also need them to monitor expenditure and ensure the savings are not spent on unnecessary expenses or on poor investments.
What Is The Quickest Way To Build Generational Wealth?
The quickest way to generate generational wealth is to start saving your income. It is true that savings alone cannot make you rich. However, saving and spending minimally on luxury allows you to grow capital that you can channel towards investment. It’s an absolute priority to educate yourself on where to invest and assure that the returns on investment (ROI) will be lucrative in the future.
The Best Ways To Build Generational Wealth
Make no mistake, physical cash is not the only way to build and transfer generational wealth. Here, we highlight other ways black families can use to break the cycle of financial exclusiveness. How many of them do you already have?
Education is the safest form of investment for both you and your family’s future in terms of generational wealth. The majority of the time, a solid education will provide a platform for sustaining a great income. Also, the right quality of education will allow you to think about problems and ponder on creative ways to solve them. University degrees often guarantee a higher wage. Making money is one thing and spending it wisely is another ball game altogether. The knowledge for the latter can come from enrolling in short financial courses.
#2. Real Estate Investment
The most common form of generational wealth is real estate. The real estate business encourages growth and there are numerous ways in which you can earn a consistent income with a great property. The reason why real estate owners often end up very rich is that properties appreciate exponentially, thanks to increasing population and urbanization. In real estate investment, you either buy homes and resell them at a premium or you sell land.
#3. Family Business
The term “family business” is broad. There are lots of corporations and small businesses alike that are owned by families. A good example is Ubisoft, which now has branches across various different continents. Such businesses with strong structures will not only give knowledge to the young generations in the family, but they can also grow to take over the company by succession. However, unlike handing over cash, the young generation will not struggle with finding their foot because they are already part of the business. Building on a family business backbone is often easier than starting a new business, right? Share your thoughts in the comment box below.
Similar to family businesses, entrepreneurship is a great form of education to teach the next generation. By encouraging them to learn and start their own form of businesses (market days and garage sales), you’re more likely to see positive results when they are in a position to take over the family business or start their own. The skillset and art of entrepreneurship is the ideal lesson to educate the youth to venture towards financial independence.
#5. Stocks Investment
When we think of investing in stocks, we’re familiar with plenty of success stories most notably Warren Buffet. He’s popular for his prestigious investment track record. With extensive research and self-education on stocks and shares, the door is wide open for potential generational wealth. In the beginning, the main principle is to invest in value, rather than high risks which could turn your investment into a negative. Other stock investment experts advise aspiring traders to focus on large or emerging sectors of the economy that can support long runways of growth. This will build into generational wealth in the long run.
#6. Life Insurance
While we all know we won’t live forever, something we should take into account is what happens when we are gone. Insurance firms offering solid life insurance plans help us to pass the financial baton to the next generation. It’s reassuring to guarantee financial stability for your loved ones. There have been numerous cases where the family’s bread-winner suddenly depart throwing the entire family into debt or financial crisis. Therefore it’s imperative to have comprehensive life insurance, to ensure that grieving will never have to include financial setbacks for your loved ones.
#7. Retirement Savings
It’s important to prepare ourselves for the time that we’re unable to ply our trades full-time. Experts advise that you should start planning for your retirement from your first paycheck. Your savings plan will determine how luxurious your retirement would be. When it comes to any form of savings, be sure to utilize the services of a financial advisor. With the economy becoming stiffer, you can’t afford to depend on your children to take care of you when you are old.
#8. Cryptocurrency Investment
Many individuals have gambled on the newly developed cryptocurrencies, and are now living luxuriously to tell the tale. Very similar to stocks, cryptocurrencies offer a lucrative return on investments and can see your own money grow extremely fast. It is not an overnight success, however, and does require lots of financial education and discipline. As a newcomer, it’s best to start small and stick to the three main cryptocurrencies, namely Bitcoin, Litecoin, and Ethereum. Always look out for emerging financial opportunities that technological advancement offers.
What To Do Once You’ve Built Your Generation Wealth
The best advice for any self-made wealth builder is to spread their wealth sensibly. While money is earned through hard work, careless spending and over-the-top luxuries can see your money deplete in no time. It is always important to invest your funds wisely so that your future generations can benefit from your hard work.
To see your money stretch into generational wealth, you need a clear plan. Be intentional with your approach and attitude towards making and spending money. We are all aspiring individuals who want to leave a legacy for future generations. Therefore, it is important to implement a solid foundation on which generational wealth grows. Can you name 10 Africans that have successfully built generational wealth? Share your thoughts in the comment box below.