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Strategies for Building Generational Wealth

Strategies for Building Generational Wealth

August 15, 2023


Generational wealth is sought after because it promotes freedom and financial independence. It's not just about reducing hardships for your heirs; but also, about fostering healthy habits and conversations around money. Please read the following article for more information:

Strategies for Building Generational Wealth

A popular Chinese proverb says: “The best time to plant a tree was 20 years ago. The second-best time is now.” The idea applies to investing, growing your assets, and even when trying to build generational wealth.

Perhaps your goal is to pass assets to your children, spouse, or other family members. Or you hope to one day give all or most of your assets away to charity. Maybe you have other plans. Whatever your long-term vision, there are many ways in which you can try to build wealth that lasts.

We’ll explore what generational wealth is, then dive into strategies to establish it.

What is generational wealth?

Generational wealth is a term used to describe the money and assets passed down from generation to generation, including investments, real estate, businesses, and nonprofits. To some, generational wealth includes intangible assets such as a family’s reputation, relationships, community impact, and values.

Generational wealth is sought-after because it promotes freedom and financial independence. It’s not just about reducing hardships for your heirs and more about fostering healthy habits and conversations around money. This process is easier said than done, though: About 70% of generational wealth doesn’t make it past the second generation, and 90% disappears by the third. One famous example is that of the Vanderbilt family, who squandered enormous wealth by living far beyond their means and failing to practice healthy financial habits. Fortunately, there are ways to avoid the same fate.

A massive wealth transfer is brewing

The Baby Boomer generation is set to pass down an estimated $30 to $68 in assets to the next generation of investors. This massive wealth transfer could prompt many investors to wonder how they can establish a legacy that will endure.

Some may think the likes of Warren Buffett leaving large sums to charity or his family is the only form of true generational wealth, but many investors can leave a legacy with fewer resources. Generational wealth can be as simple as leaving money for your grandchildren to attend the college of their choice, paying a down payment on a house, or helping your heirs avoid falling into debt. Generation wealth, in short, can take on many forms.

6 tips to help build generational wealth

Here are six strategies you can take to strive for wealth that lasts for generations. There’s no one size fits all approach, and every investor’s circumstance is different. But these ideas are designed to help clarify your vision and get you in the right frame of mind. Thoughtful planning, saving, and communication can go a long way.

Encourage healthy financial literacy habits within your family

Nearly four in five people feel anxious about their financial situation, and 58% feel that finances control their lives, according to a study by Capital One and The Decision Lab. This highlights the need to start educating family members from a young age to increase confidence and mitigate anxiety as they approach their financial lives.

One way to start educating financial literacy to those around you could be as simple as having regular conversations about saving, investing, and budgeting. Consider regular discussions around the value of long-term thinking and helping them understand the power of concepts like compound interest. Share your favorite personal finance books or sign everybody up for an online. Try and maintain an honest dialogue around healthy financial habits. Though it might sound obvious, educating yourself about good financial practices – and informing your heirs – can make a big difference.

Create and fine-tune an estate plan

Estate planning isn’t limited to just a will. Consider working with a professional estate planner or engaging with online legacy planning resources to get started. It’s critical to establish who will carry out wishes, set up trusts where appropriate, consider tax management strategies to create a more tax efficient transfer to your heirs.

Candid – and early – conversations about the inevitable are key. Creating and then fine-tuning your plan is also critical, and it is worth considering telling your family and loved ones about it. Doing so could prevent conflicts and challenges down the road: Nearly 70% of Americans don’t have an estate plan, which may of course cause legal issues – not to mention potential conflict within families –  over time. Make arrangements to ensure you have the proper documentation. Don’t assume – getting your wishes on paper can help keep your legacy alive the way you want it to.  

Diversify your assets

Stocks and mutual funds might be right for you, but so could other assets. One example is real estate. Homes can be an asset with cash value, either passed down to your beneficiaries or sold. Consider what else can be passed along whether it’s art, jewelry, or even an impressive wine collection. Have conversations about who in your family values which items the most and whether those items should be kept or sold upon inheritance.

Invest in education accounts

A meaningful gift you may consider leaving could be education accounts, giving younger generations the ability to have more options surrounding their education. As education costs continue to rise, many Americans are caught trying to pay off student loans for decades or electing not to pursue an additional degree because of financial constraints. But you can consider saving for children's education through a 529 plan, for example, which are college saving plans with tax benefits. Numerous studies have shown that people with college degrees tend to earn significantly more than those who finished school after graduating high school, increasing the odds that younger generations preserve wealth.

Pass down a business

Passing along your life’s work is a great way to build wealth that could potentially benefit generations to come. Start including and educating your heirs if you’re planning on leaving the business to them rather than selling it before you retire. If you already own a business or are planning on starting one, don’t assume your heirs want to carry on the business, especially if they are passionate about their careers and may not have time or the know-how to keep your legacy alive this way. Have a conversation early on about who is interested in keeping the business alive, or what selling it would look like and what your expectations are for keeping this type of legacy alive.

Engage in charitable giving

One way to pass along the goodwill generated from generational wealth is to give back. Establishing a legacy of giving may not directly add zeros to your heirs’ wealth, but can have a lasting impact. Giving back can help people feel connected to the world, build relationships, and set a positive example. Consider speaking to your financial advisor about setting up a private foundation or a donor advised fund (DAF) to access the tax benefits each provides and start including family members in giving conversations.

Final thoughts

Building generational wealth may take a while, but it can ensure a better future for generations to come. Consider that if the tree was not planted yesterday, there’s no better time to start than today. There are a number of options to attempt to build generational wealth and try to better position future generations.

Please let us know if we can help you and your family with thinking through and planning to meet these goals.

Matt and Andrew


This material is intended for informational/educational purposes only and should not be construed as tax, legal or investment advice,a solicitation, or a recommendation to buy or sell any security or investment product. Investments are subject to risk, including the loss of principal. Some investments are not suitable for all investors, and there is no guarantee that any investing goal will be met.
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A 529 plan is a college savings plan that allows individuals to save for college on a tax-advantaged basis. Every state offers at leastone 529 plan. Before buying a 529 plan, you should inquire about the particular plan and its fees and expenses. You should also consider that certain states offer tax benefits and fee savings to in-state residents. Whether a state tax deduction and/or applicationfee savings are available depends on your state of residence. For tax advice, consult your tax professional.  Non-qualifying distribution earnings are taxable and subject to a 10% tax penalty.

Diversification does not guarantee a profit or protect against a loss in a declining market.  It is a method used to help manage investment risk.


Davies, Anna. “6 Tips For Building Generational Wealth Through Real Estate.” BNY Mellon
Wealth Management. Aug. 5, 2021.

Wealth, Anne-Lyse. “Understanding Generational Wealth & How to Build It.” Daily Capital, Empower. March 14, 2022.

“How to build generational wealth.” Principal.