What Is Generational Investing And How Does It Affect Me?

Generational investing, or generational wealth, refers to assets and wealth that is passed down to your descendants. While this might seem somewhat obvious, in reality, it’s far from simple to achieve. Figures show that a shocking 70% of families lose such inherited capital in the second generation, rising to a whopping 90% in the third.

For those that want to reduce this loss factor and know that their loved ones and their descendants will benefit from their income-generating endeavors, careful strategies are necessary to ensure generational wealth lasts.

The Lowdown on Generational Investing 

• Why do so many families squander generational wealth?
• Building wealth with generational investing in mind

Why do so many families squander generational wealth? 

There are many reasons inherited wealth is frittered away over the generations. While it might be a lack of knowledge as to how to safeguard for the future, one interesting factor is the difference in attitude that each generation has towards assets and investing.

There’s a gaping chasm between how Generation Y (Millennials) and Gen Z feel about money and wealth compared to Baby Boomers and even Generation X. The former two have always had technology and are confident about digital communication, whereas the Boomers and Gen X generally have a more traditional attitude.  

A large majority of today’s adults begin their working life saddled with substantial student debt, something that wasn’t the case a few decades ago. An inheritance is likely to go towards paying this off, rather than the money being channeled towards further income-generation investments or the purchase of a home. Of course, there’s not an awful lot you can do about this once you’re gone—but what you can do is put strategies in place that create income streams that build wealth in the long-term and create ongoing income streams that your loved ones can benefit from.

Building wealth with generational investing in mind 

There are 4 distinct methods to building long-term generational wealth:

• Invest in real estate: Not only does real estate consistently increase in value in the long term (despite short-lived fluctuations), but it also produces an income. Rental property is a tangible asset that provides your beneficiaries with an ongoing cash flow. It also has tax advantages, such as deductible maintenance costs.
• Pass on your business: Around 90% of businesses in North America are family firms (according to the Census Bureau). A solid business is a great asset to pass onto your descendants and can bring long-term profit and security.
• Invest in stocks: Whether this is index funds or more active investing, stocks are a fine way to build wealth over your lifetime. Unless you have experience in selecting stocks, it pays to partner with an expert financial provider, such as Capita, to ensure the highest levels of success.
• Actively save money: In addition to the income-generating ways above, you should actively save money as well. This might include a portion of rental income, dividends from stocks and investments, or an affordable portion of your salary. Be sure that this money is stored in the place where you benefit from the most tax breaks and/or the best interest rates.

Generational Investing Means Preparing for Tomorrow—Today 

• Get your affairs in order and educate your descendants

Get your affairs in order and educate your descendants

Passing wealth onto future generations is best prepared for by ensuring your affairs are in order. Create a will and estate plan, set up custodial accounts, purchase life insurance, and name the beneficiaries for all your financial accounts.

If you have a business to pass on, be sure that your beneficiaries have the knowledge and the interest to do so. Even if they don’t want to work in the business themselves, they might want to employ others to do so. Whatever the scenario, talking about it today will make any successional transition far easier in the future.

Partner With Capital For Further Generational Investing Security

Real estate, stocks, savings, and business ventures are key to generational investing. Capital is a leading global investment service that works with you to create bespoke plans to build wealth according to your situation.

Every day that passes is one where your money isn’t working as hard as it should do. Don’t delay a moment longer— visit https://www.capitafinancialnetwork.com/services/investing and get in touch today for a no-obligation chat about your generational investing goals.