- Personal finance pros Echo Huang and Kelly Lannan joined Insider’s Master your Money virtual event, presented by Fidelity.
- Financial literacy and hiring the right experts are key. Building wealth takes smart planning.
- Generational wealth is passed down in different ways, and some communities face barriers.
- This article is part of a series focused on millennial financial empowerment called Master Your Money.
One out of five households in the US has zero or negative wealth, meaning they owe more than they own, according to the Institute for Policy Studies. Additionally, more than two-thirds of Americans think their children will be financially worse off as adults than they are, and most don’t have money saved for them, according to the Pew Research Center.
There is a wealth gap in America, and the coronavirus pandemic has made the disparity even more pronounced. Insider’s recent live virtual event, Master Your Money: How to Create Generational Wealth, presented by Fidelity, addressed head-on how to start creating generational wealth that outlasts you.
During the event, panelists Kelly Lannan, vice president of Young Investors for Personal Investing, a unit of Fidelity Investments, and Echo Huang, a financial planner and founder and president of Echo Wealth Management, outlined how to start building generational wealth that lasts.
How wealth is typically passed down
Generational wealth is usually passed down through:
- Life insurance
- Trust fund
- Family business
Homeownership is how most Americans pass down generational wealth. The home your parents bought 40 years ago appreciates in value and is passed on to the next generation.
Being a beneficiary of a life insurance policy is another way generational wealth begins. The proceeds can be used to pay off debts or start a business. Unfortunately, a recent study showed 43% of Americans don’t have life insurance.
You don’t have to be wealthy to have a trust fund. A revocable trust or irrevocable trust can hold real estate, stocks, bonds, and other assets that can be passed down.
Obstacles to creating generational wealth
A Pew Research study showed that “incomes of first-generation college graduates lag those of other graduates.” This is a barrier to wealth creation because many first-generation college graduates carry massive student loan debt to afford their college education. The income lag, coupled with student loan debt, are obstacles to homeownership and wealth creation.
The wealth gap exists in America. Pay inequality and institutional racism, through housing segregation and redlining, continue to create …….