Understated types of generational wealth
THE STACK #21When we hear “generational wealth,” we often think about the Gates, Waltons, Rockefellers and the uber-wealthy in our society.
Most people think generational wealth is out of reach because they can barely get by today and have nothing to pass down.
Some think generational wealth is evil because your offspring could squander all your hard-earned money and become a bum in society.
Others think that it creates a wealth gap in society.
We can pass down generational wealth in several ways without leaving a large inheritance or property.
In today’s STACK, we will look at less obvious ways to pass down generational wealth.
THE STACK
1. Pay off your debt
Pay off your debt (including the mortgage) so your children don’t have to take on the responsibility of paying off your debt.
It’s okay if you cannot leave them an inheritance, but handing down your debt puts them behind and worse off.
2. Save for your retirement
Your kid shouldn’t be your retirement plan.
It’s essential to prioritize your retirement savings before anything else.
If your kids have to foot some of your bills at retirement, this will strain their finances.
Your kids will appreciate not worrying about you at retirement more than the fancy toys they get every Christmas.
Prioritize your retirement savings.
3. Plan your estate
Estate planning is something we procrastinate.
Your kids shouldn’t have to cover your funeral costs (GoFundMe doesn’t count), worry or fight over your estate.
Dying intestate can be frustrating for your family, and the process can be long and complex.
Some of the plans you can put in place are:
Have a will
Make funeral arrangements
Plan for estate taxes
Get a term life insurance
List beneficiaries on all your investment accounts
Establish a power of attorney
4. Save for Tuition
One of the greatest gifts to your kids can be to save/invest for their tuition.
You can do this by setting up an RESP account and investing annually.
If you contribute $2,500 yearly, you will receive a CESG grant of $500.
If you invest that in an S&P 500 ETF every year, after 16 years, they will have $100,000* they can use towards their tuition.
Now I know you’ll say $100,000 won’t be worth much 16 years from now, but it’s better than zero dollars.
*assumes an 8% rate of return
5. Financial Education
It’s crazy that we don’t learn how to manage our finances in school.
Educate your kids about money early on to help them better manage money.
You may not be able to pass down an inheritance, but you can teach them how to make, manage and grow money to build their wealth.
6. Purchase their first car
Most people go into debt to purchase a car.
A car payment could cost anywhere from $400/month.
Providing this assistance could free up cash flow in their budget to invest or buy their first home.
If you can’t afford to pay the full price of the car, you can match their savings.
7. Down payment assistance
This is probably the hardest one to do, but it’s possible if you’re intentional about saving and investing today.
8. Cover wedding costs
Weddings make a massive dent in people’s pockets.
Most people take years to pay off their wedding.
Helping your kids cover these costs (or some of them) can help them divert that cash towards other things like investing or a down payment.
You aren’t obligated to do everything listed (except 1-3); just doing one of these will go a long way to help your kids financially and break the cycle of struggle.
THE TOOL
I share a lot about getting the right type of life insurance, which is why I only recommend TERM LIFE insurance.
Term life insurance should be able to cover most of the things listed above.
Not sure how much you’ll need?
Use this calculator to find out👇🏾
THE ACCOUNTABILITY
If you have dependents, carve out some time this summer to create a Will.
THE COURAGE
THE KNOWLEDGE
INTESTATE
This is someone who dies without a will
POWER OF ATTORNEY
This is the authority to act on another person’s behalf in all legal, financial or specified matters, including medical care.
That's it for this week's STACK!
Talk to you next week,
But until then...Keep Stacking!
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