2 Steps You Can Take to Start Building Generational Wealth – Business Insider
- As a financial planner, I’ve seen the term “generational wealth” rise in popularity in recent years.
- To build generational wealth, I recommend choosing the right life insurance policy to pass on funds.
- I also recommend having a full estate plan in place to ensure your assets end up in the right hands.
- Read more stories from Personal Finance Insider.
The term “generational wealth” has become widely used in recent years, but what is it and how does one start to build it? Like many other things in life, the definition depends on each individual. One person might think generational wealth means leaving a substantial amount of money in a trust account to heirs, whereas another could define it as providing financial flexibility to heirs by leaving a house that is mortgage-free. One person might leave a sustainable business for their heirs to operate or sell, whereas another individual could focus on helping their adult children pay for major expenses in their life (e.g, a wedding, down payment on a home, seed money to become an entrepreneur, etc.).
Regardless of how a person defines it, there are ways to achieve this goal. This article provides two steps that someone can take to start on a path to building generational wealth. Depending on the person, each one of these areas could range from being relatively simple to extremely complex. For the purposes of this article, I will focus on the basics and provide examples of how setting this foundation can effectively lead to the ultimate goal of generational wealth.
1. Securing the right life insurance
Plain and simple, life insurance (when structured properly and appropriately for the individual) is a great financial tool that can be a catalyst for generational wealth-building. Discussing how much and what type of life insurance is not the purpose of this article. The goal here is to show how valuable life insurance can be within any financial plan. Take the following two examples.
Life insurance to cover college tuition
Mike and Sarah both are doing well in their careers, but neither one of them grew up in households that had much money. They got married three years ago and just had a son named Jack this year. Upon the recommendation of their financial planner, they both purchased life insurance policies worth relatively high amounts. This decision was made to make sure there would be adequate financial capital available to provide for their son’s upbringing (which includes college tuition) in the event one of them dies prematurely.
Unfortunately, Mike faces some serious health issues and dies. Sarah is devastated, but throughout her grieving process, she does …….