- Generational wealth is building assets that create a legacy for future generations.
- Building generational wealth can start by simply purchasing your first home. Continue saving to buy another asset and repeat the process until you have multiple investments that future generations can benefit from.
- There are several benefits in building generational wealth, including sufficient family support and a form of safety nets for next generations.
In today’s fast-paced and ever-changing world, achieving financial stability and security has become a significant goal for individuals and families alike. But what if we shift our focus from short-term gains to long-term prosperity? That’s where the concept of generational wealth comes into play.
In this propcast episode, Justin Lieberknecht is joined by his parents, Raleigh Lieberknecht and Pamela Lieberknecht, to tell the story of the family’s rich history and discuss the profound concept of generational wealth.
What is generational wealth?
Generational wealth refers to assets that are inherited by successive generations, encompassing various forms such as cash, investment funds, stocks, bonds, real estate properties, and even businesses. Projections indicate that within the next two decades, over $80 trillion will be transferred from current older generations to their children and other beneficiaries. However, it’s important to note that the distribution of multigenerational wealth is not uniform or equal among all individuals or families.
Generational wealth is not merely about accumulating riches for oneself; it’s about creating a lasting legacy that benefits future generations. It’s about breaking the cycle of financial struggles and providing opportunities for our children, grandchildren, and beyond. It’s a mindset that embraces strategic planning, wise investments, and nurturing a sustainable financial ecosystem.
Building generational wealth
One thing to know in building long-term family assets is that it has to start somewhere. It doesn’t matter what type of property or where to put it, as long as it starts as soon as possible. Jumping from one home to another, Mr. and Mrs. Lieberknecht took a leap and decided they didn’t want to rent anymore. They wanted the room, the space, the lot, and the investment.
“In the back of my head, it was long-term. Gotta get your hands on something now,” Raleigh said.
Even when it initially requires sacrifice financially, you’ll be able to make the necessary adjustments and get used to monthly payments in the long run.
Now, another useful tip in building your family’s wealth is that even when you finish your payments earlier than expected, continue to make those “monthly payments” but send them to your savings bank.
“You keep putting it in the bank. You pretend that it’s still there. Like you still have a payment. You’ve been paying it and it’s not hurting you,” Pamela said. “You keep paying it and when something big comes along, you have the money to go do that.”
This certainly helps in saving more money to invest in the future. So when an opportunity presents itself, say buying another property, you’ll be ready and won’t be taking a “leap” like the first time you invested.
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Benefits of generational wealth
For real estate investors, the current average appreciation rate of homes is 2% month over month and 14.5% year over year. But aside from property appreciation, there are more benefits that you can take advantage of from family assets like real estate.
Real estate properties can be a stable source of income by turning it into a rental home. For Justin’s family, they were able to support and take care of his grandmother by renting her house.
“We didn’t sell it. We had it and we were able to rent it,” Justin explained. “As an accidental or incidental homeowner, spare homeowner specifically, it’s a really strong way to be able to support people in the family that are going through end-of-life care.”
In their case, they had two options. The first was to sell the home. But, if they did, they would only have a limited amount to support his grandmother. Good thing they decided to rent it, and they were able to generate a stable source of income that helped them manage the costs of care. Plus, should they need more money, they still have the house to leverage as an asset.
For younger generations, it is truly a privilege to have parents that already started building wealth during their time. This gives them the opportunity to be bold in making investment decisions while at the same time feeling secure.
“I tend to be riskier in my investments. I tend to be more confident in my ability to make it work out in the end. And I think that’s partly because you guys have provided such a safety net for me that I go, ‘I’ll try. What’s the worst that’ll happen?’” Justin stated.
But, this doesn’t only benefit the next generations. For Raleigh and Pamela, it was for both the next and previous generations as they are their parents’ safety nets.
In summary, generational wealth acts as a strong foundation for future generations to thrive. It serves as a buffer against financial instability and can weather economic downturns, unexpected expenses, and unforeseen challenges. Generational wealth also allows individuals to pursue their aspirations and take calculated risks, which is the case for Justin provided by his parents. By breaking the cycle of poverty and providing stability, generational wealth acts as a catalyst for long-term prosperity and empowers individuals to reach their fullest potential.
This article helps us recognize what kind of investing style we have. There are several investment strategies out there, and there are multiple ways in which we can look at them from our perspective. A huge chunk of how our mind works is our past experiences that hone us to become what we are today.
For generations who are lucky enough to have stability in their families, their approach can be a lot different than those who are just starting to build their own wealth. And there’s nothing wrong with it.
“If you are in a position where you’re very conservative and don’t want to go too risky, you don’t have to. And you can still do these little pieces where you hold on to any property in the family, pay stuff off, and [so] you can enable the next generation to be a more adventurous investor/homeowner,” Justin concluded.