Hey everyone, it’s Finance Fridays again. Today we’re going to explore something called “Generational Wealth“, although in a different way than you may think.
I think the normal context for which people speak about generational wealth is wealth that is passed down from generation to generation. The prototype for this is when a wealthy family creates trusts to give to their children. Usually they are constructed in such a way that the children don’t get access to the trust until a certain age and/or certain requirements must be fulfilled. Of course, there are other ways go pass down wealth such as property and dividend stocks, etc.
However, the way I am going to talk about it is a little bit different.
First a little backstory:
My father and mother are both immigrants from Vietnam. They both worked very hard to provide a stable home environment for my siblings and I. We always had the necessities, but of course there were things we wanted as children that we couldn’t have.
That’s normal — you can’t be given everything you want otherwise you have no hunger to succeed. In general, I grew up learning that in order to move up in the world you needed to educate yourself, get a good job, and work hard.
This is still true. I will teach the same thing to my children.
However, my parents never really taught me about what to do with my money after I had a good job. It’s not that they were hiding it from me, it’s just that their life plan didn’t include things like that. My father’s retirement primarily hinged around his 401k and his pension through the university he teaches at. The majority of the money my parents made went to taking care of the kids and paying the mortgage.
Their retirement plan is different than mine. It was very much a set it and forget it style of retirement. My father planned to work until he was 70 or so, and when he retired the pension and 401k would be there for him, and the house would be virtually paid off. The kids would all be grown up and self-sufficient by then… and we all are.
There was never any plan in place for the creation of generational wealth, and honestly, we, their children, never expected it.
However, it’s my turn now. When it comes to finance, I’ve probably read more and learned more about it than anyone else in my family. Even then, I’ve barely scratched the surface of everything there is to know — but it’s enough to teach everyone else and at ;east get them on the right path.
I would hope that my sister, brother, and cousins of my generation know that they can come to me for help/advice. Of course, they don’t have to take my advice, but at least it’s from someone who genuinely cares about their well-being.
So… then what?
Then the next step is the next generation…
Yes, you should work hard and save money. However, the next step is making sure your money is working for you. Take responsibility for it, and don’t let anyone do it for you.
My parents never talked to my siblings and I about money. They did this out of love because they, as the adults, needed to deal with any money problems. We, as children, did not need to know or deal with it.
So for me, when I talk about Generational Wealth, I am not talking about giving Lucas and Kylie property or money when I pass on in the form of a trust. For me, when I talk about Generational Wealth, it’s my promise to my children to teach them how to manage their money at a very high level.
I won’t be around forever — and even if I was, I don’t have the answers to everything. Just leaving my children (or grandchildren) money doesn’t help them in the long run. Teaching them its importance as a tool, and how to manage it is true generational wealth.
Basically, I can sum up this entire post in 2 quotes:
“A fool and his money are soon parted.”
“Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime.”
Generational wealth is passing down wealth to the next generation.
However, true generational wealth is teaching your children the knowledge to gain and maintain it.
Agree? Disagree? Questions, Comments and Suggestions are welcome.
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