The world of wealth, finance, investment and legacy builders has traditionally, and for far too long, been dominated by men.
Historically, family names like the Rockefellers, the Rothschilds, and the Vanderbilts come to mind. Today, it’s names like Walton, Koch, Mars, and Buffet that are synonymous with a legacy of wealth. It’s a concept that remains foreign to many of us; however, with the steadily increasing number of women millionaires and billionaires, it’s a goal that is coming into view for many.
What is Generational Wealth?
Generational wealth is defined as the totality of assets that are passed down from one generation to another, often as an inheritance passed to children or grandchildren. These assets can include stocks, bonds, real estate, family businesses, and of course cash.
The idea of building generational wealth is so far removed from the reality of many women today that it can almost be seen as impossible to attain or even dream about. Nothing could be farther from the truth.
Women not only possess the ability to build generational wealth, we have a moral imperative to do so.
When women hold wealth, great things happen.
Studies continually show that women are more likely to use their wealth to create a positive impact in the world. Impact investing with a social focus is increasing as women control more wealth, and it only seems to be rising.
According to a study by RBC Wealth Management, two-thirds of women believe they have more opportunity to tackle societal issues through impact investing, compared with 56% of men. 65% of women say they have a personal responsibility to use their wealth to benefit broader society.
All of this is done alongside another goal: to not only provide a financial legacy for the next generation, but to do so with a healthy dose of financial literacy.
Women recognize the error of past generations, when patriarchs of wealthy families acted as the gatekeepers of all their assets and investments. Without educating their children and grandchildren about how to maintain and grow their wealth wisely, which is evidenced by the staggering reality that 70 percent of wealthy families lose their wealth by the next generation, and 90 percent lose it by the generation after that.
How to Create Generational Wealth
First, you must begin with a mindset shift. Adopt the belief that you are worthy and deserving of wealth. Shake off the lie that society has fed us – that it is enough to have 3-6 months of savings, a modest retirement plan, and the ability to provide for our families.
All of that is necessary and important, of course, but there is so much more available to us when we begin to open our minds to the possibility.
Let’s examine six key ways women can begin building generational wealth for ourselves and our families.
1. Eliminate Debt
One of your top priorities should be eliminating debt of all kinds. Credit cards, student loans, auto loans, and even mortgages. Once you are debt-free, you will have many more resources to begin investing and building wealth.
2. Educate Yourself and Your Children
Financial literacy is perhaps the most crucial piece of the wealth building puzzle. Find a trusted financial advisor to assist you with investments, and work from a budget. Pass along financial education to your children, and model healthy financial habits for them.
Even something as simple as making it a habit to talk about your spending, saving, and earning with children can have a lasting impact.
3. Invest in a Variety of Assets
Stocks, bonds, real estate, even fine art and jewelry can all be excellent investments to help you build generational wealth. As the saying goes, it is never wise to put all your eggs in one basket. We recommend working with a trusted professional to help you select the right investments and build a diversified portfolio.
Keep in mind: your investments can (and should!) be reflective of your interests and passions. In fact, when your investments are anchored to a social or environmental impact you wish to see in the world, your motivation grows even larger. There are numerous impact investment funds, socially responsible investment strategies, green funds, and more.
Women’s willingness and interest in making a social and environmental impact in addition to financial gain is what makes our push to female generational wealth builders so important.
4. Insure Yourself and Your Assets
Proper insurance is another key way to build and protect generational wealth. Not only do you need sufficient insurance on your property and other investments, but purchasing a significant life insurance policy is one of the most straightforward (and affordable) ways to pass on money to your children.
5. Generate Multiple Streams of Income
The vast majority of people who are able to accumulate significant wealth have more than one way to earn money. On average, millionaires have seven different streams of income!
In addition to your main source of income, consider ways to bring in more passive income. This can include rental properties, peer-to-peer lending, e-commerce products, or book royalties. Often these sources of income require a significant amount of upfront work, but over time will pay off.
6. Create an Estate Plan
All of this wealth building will be for nothing unless you create a solid estate plan. Too many women put this off until later, either due to lack of urgency or lack of awareness about the importance. A comprehensive estate plan is crucial if you want your money and assets to be passed on to your children or other beneficiaries.
Normalize Financial Conversations
One of the main reasons women remain behind the curve in building generational wealth is the societal stigma we have when it comes to talking about money. We have been led to believe our salaries, our budgets, our investment strategies should remain private. Celebrating financial success or lamenting financial difficulties is considered too personal to be shared in social circles.
This culture of silence about money and financial planning has kept women from accessing the knowledge and mindset needed to grow generational wealth for far too long. It is time for a change.
Talk with your children early and often about the family finances. Model for them the idea that money is not something to be hidden away. Rather, teach them that money can have an enormous impact on the world.
Practice opening up to your peers about your financial goals. Share about your financial journey on social media to the extent you feel comfortable. You don’t have to share exact numbers to paint a picture of the financial goals you have for your family.
Seek out new ways to use your money in a positive way – locally and globally. Women are in a unique position today. We control more wealth than we ever have before, and we are overwhelmingly determined to use it for good.
Together, let’s change the world.