What is generational wealth and how can you build it? | Job Binary

As economists continue to predict the coming recession, the question is what they can do to shore up their wallets and grow potential amid so much chaos. For some, a recession can be a great time to build generational wealth that can last for years.

Generational wealth refers to financial assets that are passed down from generation to generation. This can be in the form of property, investments, cash or other items of monetary value.

Such wealth helps ensure that future children or relatives have some financial support.

However, building wealth is not and has not been easy for everyone.

Because of systemic barriers, including racial discrimination in housing, employment and banking, the typical white family has eight times the wealth of the typical black family and five times the wealth of the typical Hispanic family, according to the Federal Reserve.

According to lending company LendingClub, 54% of the nation has paycheck to paycheck. A 2021 report from the Federal Reserve found that about 36% of Americans don’t have enough money to cover a $400 emergency.

PHOTO: A businesswoman analyzes stock market charts and key performance indicators.

According to Julie-Alma Taveras, personal finance writer and founder of Investing Latina, having disposable or generational wealth is a plus. For people on limited incomes, taking steps to build wealth can be difficult.

Catherine Collinson, president and CEO of the Transamerica Institute, a nonprofit financial wellness organization, says there are still ways for people to incorporate wealth-building practices into their daily lives.

“Living paycheck to paycheck can be scary, especially now with rising inflation and the lingering effects of the pandemic,” Collinson said. “Although it’s easier said than done, it’s important to stay positive and not get down or overwhelmed, as this can backfire.”

Financial experts say there are different paths to wealth, and not everyone’s path is the same.

This journey can start with small steps as easy as teaching your children and family about financial planning, to bigger steps like owning a property that accumulates value.

Teach your children and family about financial literacy

Collinson recommends involving children in family financial budgeting decisions. For example, he says vacation planning should include budgeting, identifying expenses, and making necessary arrangements to avoid overspending but maximize fun.

The same can be said for other family activities, such as birthday parties, pet care, or grocery shopping.

Collinson said his grandparents influenced his approach to wealth creation.

“Having lived through the Great Depression, they were determined to live within their means and save as much as possible for the future,” Collinson said. “They taught me that how you manage your money matters as much, if not more, than the size of your salary when it comes to building wealth.”

Taveras also relied on the influence of family members who owned the business to put him on the right track for good spending.

“I wanted to introduce myself and my family, who are business owners and have always been very strong financially,” he said.

ASThe &P Global FINLIT survey found that only 57% of US adults are financially literate.

Invest in the stock market

Investing in the stock market is another way people can get their hands on growing wealth.

Taveras says investing in stocks can become a source of passive income, where an investment of just a few dollars a month can grow over time. Mobile applications have made access to the stock market accessible to the average user.

Taveras started investing when prices were low, and says his rising stocks have become “a big part of building wealth.”

“We were in the middle of a downturn β€” it was the 2008 recession β€” and as you can imagine, the market has grown exponentially since then,” Taveras said. “It just goes to show you don’t need a lot to get started.”

With Wall Street predicting a recession next year, now may be the time to start preparing to invest in the stock market.

Not only the prices of some stocks may fall, but also the prices of some houses.

Ownership of property and real estate

Owning your home can be one way to ensure that future generations have access to affordable family-owned accommodation.

Although home values ​​can fluctuate up and down due to a variety of factors, the Federal Housing Finance Agency found that the housing market has been positive every year since the beginning of 2012.

Not only will the home appreciate in value from when it was purchased, but if the home is passed down to a child or family member, it can save or earn a large chunk of money for future family members.

However, experts admit that this goal is more difficult to achieve.

As for some common mistakes to watch out for: Financial experts caution employees against taking advantage of 401(k) plans and other benefits offered by workplaces.

They also note that putting off necessary expenses, such as home or car repairs, can often turn problems into worse problems that cost far more than they originally cost.

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