In a recent survey by Ameriprise Financial, more than three in four Americans (78%) said they had taken at least one step to build generational wealth (Ameriprise Money and Family study: Money & Family: A new study on generational income ). But what exactly constitutes “generational wealth” – and how can you achieve it?
The most common answer (44%), according to survey respondents, is wealth over $500,000 that is passed on to loved ones. Depending on your financial situation, half a million dollars may or may not seem like a lot of money. But one thing is clear: no matter how much you intend to give to family and friends one day, it helps to have a plan.
If you, like the majority of survey respondents (68%), say passing on generational wealth to your heirs is important to you, here are some things to keep in mind: Strategies for increasing generational wealth
Be a strategic saver
Rather than leaving the accumulation of wealth to chance, strategic savers set goals and actively strive to increase their savings. They regularly contribute to savings accounts. Active saving slows spending and influences income behavior. They can put off shopping, work longer, look for better-paying jobs, or make other choices (and sacrifices) to ensure their savings goals are met.
Invest in stocks
Investors who are serious about income growth use the stock market. Most experts recommend a buy-and-hold approach to maximize revenue over time. A risk-adjusted, diversified and balanced portfolio can help investors achieve their investment goals.
Invest in real estate
Historically, property values have increased over time, making home ownership a leading method of wealth accumulation. Investors can also diversify their portfolios with real estate investment trusts (REITS) and other property purchases.
Pass on financial wisdom
Financial values are another important asset to pass on to heirs. Many families find it beneficial to discuss their financial decisions with their adult children and stepchildren. Clear communication can help set realistic expectations and avoid surprises and conflicts when it comes time to convey your strengths.
Consider “giving while living”
Generational wealth sharing plans may include giving now rather than waiting to pass on assets after death. Beneficiaries are often adult children but may also include charitable organizations. Giving in the present can satisfy the desire to help now and allow you to see the impact of your generosity. That said, it shouldn’t jeopardize your financial security, so make sure you have the necessary means before writing a check to your favorite cause.
Building generational wealth is a lifelong process. Along the way, an experienced financial advisor can help you develop a financial plan and set achievable goals aligned with your estate planning needs. Your advisor can work with you and your estate planning lawyer to ensure that your will facilitates your wishes for sharing the generational estate.
Bronwyn L. Martin is a Financial Advisor and Chartered Financial Consultant with Martin’s Financial Consulting Group, a financial wealth advisory firm of Ameriprise Financial Services LLC. in Kennett Square and Havre de Grace, Md. She specializes in paid financial planning and asset management strategies and has been practicing for over 22 years. To contact her: www.ameripriseadvisors.com/bronwyn.x.martin