Generational wealth is wealth that is passed down from one generation to another. We are talking of stable, significant financial, or other valuable resources. Unfortunately, it is estimated that 70% of wealthy families are likely to lose their wealth by the second generation. 90% lose it by the third generation. Clearly, this shows us that it is not easy to build and maintain wealth over generations. As such, we need to explore some of the secrets that you may use to create generational wealth.
1. Create multiple income streams
Most serious entrepreneurs will tell you that it is always advisable to rely on many products, different revenue streams. Look at it this way, if you are in an elevator which has three cables and one of them breaks, the other two will hold it up. The same principle works if you want to create generational wealth. If one product is not bringing in the profits, the others should help you stay afloat. Someone who is into poultry should not be content with that alone. There is need to diversify into other things, real estate, construction, whatever you can do that makes you money. Something that makes you money now is not guaranteed to make you money five years down the line. This is because policies can change. Technology changes too. All these can affect your revenue stream so you need to always have plan B, C, D and so on.
2. Invest in property
Property prices rarely depreciate. They keep rising, provided you are maintaining the property. So, instead of filling your garage and driveway with all the fancy cars, you need to invest more in property. Years later, when you are gone, your grandchildren will still earn a lot of passive income from rentals. By then, the Ferrari which you bought for $300 000 will be worth less than $100 000. Property is one of the best assets you can ever pass onto the next generation. If you do not know much about it, feel free to approach reputable estate agencies who can assist you choose the right investment properties.
3. Work out an estate plan
Remember, you are the only person who can determine how your wealth will be used and distributed even after your death. As such, you need to sit down with experts and plan strategically. The ideal estate plan is guided by a well thought out will. This gives direction when you are no longer there. It will spell out who gets what. That way, you will be able to give your wealth to those whom you think deserve it. Without a proper plan, opportunistic relatives may descend on your estate, grabbing whatever they can at the expense of the rightful beneficiaries. This is typical in our African culture and if you are to maintain your generational wealth you need to avoid this by planning accordingly.
4. Create a culture of saving
At an early stage during your wealth creation, you should learn to save. Normal savings accounts are a good starting point although they tend to have low interest rates. In Zimbabwe, savings accounts are also not ideal because policy changes have eroded people’s savings a couple of times before. A trust fund for your children is another worthwhile investment. Typically, people spend money then save the remainder. You should save as much as possible first then live on what is left. When you go shopping, never shy away from bargains, discounts and sales. Over the years, you will discover that you are actually saving a lot. You can set specific saving goals. For example, you can say that 20% of whatever you earn each month will go towards savings. You may then increase this regularly till you are saving even 50% of what you earn.
5. Educate your kids about good money habits
Apart from saving on your own, you also need to teach your children or grandchildren to save as well. In fact, teach them all the good money habits. We grew up not knowing much about money. Many of us did not even know our parents jobs or how they were making money until a later stage. This is dangerous as children grow up disinterested in the topic of wealth. If you want to build generational wealth, you must be prepared to teach your children about it early on. They must know and understand the business you do. Teach them how to save. Your five-year-old must already have a piggy bank with which you will nurture the savings culture. As they grow older, they are likely to be more enterprising and better placed to protect whatever you leave them.
6. Buy dividend paying stocks
By investing in dividend paying stocks, you are acquiring a portion of a company. Whenever the company makes a profit, you will be paid a dividend depending on how many shares you own. The good thing about this is that you normally do not have to do anything else after buying the shares. You just wait for dividends to be declared. In this country, the Zimbabwe Stock Exchange (ZSE) is where it all happens. Stock brokers are always ready to assist you if you need help in this regard. Stocks are generational assets just like property.
Although there are many other strategies that can be used to create generational wealth, the ones above will get you going. The best time to start is right now.