According to a study completed by Prosperity Now, "If the racial wealth divide is left unaddressed and is not exacerbated further over the next eight years, median Black household wealth is on a path to hit zero by 2053." $0?!? That is in less than 35 years. Personally, my son will only be 47, and I, for certain, cannot let this become his reality. We cannot let this become reality!
Reflect on the concepts you learned growing up around wealth. Where did you learn those concepts? Most likely, you didn't learn anything about wealth in school. I'd be willing to bet that whatever you learned, good, bad, or indifferent, you learned from the examples within your family dynamic. Have you noticed the difference between the wealth of blacks vs. wealth of whites? I'm sure you have. But how can we close this gap and how can we blur the lines to make it impossible to notice this difference?
The answer is within our children.
It is our responsibility to teach our children about generational wealth. It is one thing to teach our children how to have a healthy relationship with money, but if we are not passing wealth on to them, we cannot be sure they will acquire it. It is time we break the generational curse of scarcity and start securing our legacies. We can disrupt the wealth gap, but we must be intentional and forward thinking. Generational wealth is not just about money passed down, it is also opportunities, support, and investments to generate more money.
Let's talk steps:
Self-Care
GiphySelf-care is not only about taking bubble baths, meditating, and working out. Self-care is about preserving your health, which includes your financial health. If you have mountains of debt, poor credit, no savings/investments, or unhealthy spending habits, that is what you will pass to your children. Before your child can become wealthy, your financial independence is required. This is the first step to setting your children up for generational wealth.
Multiple Streams of Income
GiphyWe are talking about building wealth, therefore having only one source of income will not cut it. Take all of your eggs out of that one basket and start spreading the wealth. It is almost impossible to depend on a 9-5 to build wealth when lay-offs, pay cuts, and unforeseen circumstances can storm through your life at any moment. Multiple streams of income not only provides security, but it also builds wealth. Many financial books (as well as the internet… and you know the internet is always right) proclaim that the average millionaire has seven sources of income. How many streams of income do you have?
No Fund Me
GiphyLife insurance is not to protect you, it is to protect your family. Life insurance is important for several reasons. The most important reason is to ensure that you do not pass on debt to your loved ones. Leaving funeral expenses, debt, and financial burdens to our loved ones must stop! If you take nothing else from this article, take this. Go get a life insurance policy ASAP! I cannot see another GoFundMe as a substitute for life insurance. In addition to covering your debts, life insurance can leave a substantial inheritance for your family leading up to the time that you have successfully built wealth yourself.
Credit
On the personal finance scene, there is a big debate around the use of credit. Personally, I feel like credit is a necessary evil. When your child is 16 (as young as 13 with some companies), add them to your oldest credit card with excellent payment history, utilizing 10% or less of the limit, and ensure the company is reporting to the credit bureau. Warning: This should ONLY be done if you are an extremely responsible credit card user. If you are not, DO NOT take this action and see number 1 on this list immediately. Please do not ruin your child's credit before they are old enough to ruin their own. Building your child's credit at an early age allows them to immediately obtain business loans, an auto loan with a low-interest rate, buy a home, get an apartment, etc. If you are successful at building wealth, which allows them to cash flow all expenses, they will not need credit. But, it will not hurt to have a 700+ credit score at the age of 18.
Investments
I could write an entire blog post about investments and how important they are (and actually, I probably will in the future). But for now, I'll keep it brief. THIS is the part where you build wealth. In order to pass down wealth, you want to pass down assets that will continue to generate more assets.
Retirement Account
- First and foremost, you should have a retirement investment account. This will prevent you from working the rest of your life while continuing to generate passive income. Once you leave this earth, your contributions will be transferred to your beneficiaries (your family).
Real Estate
- Investing in property is arguably the most efficient way to build and pass on wealth. Real estate is a tangible purchase you can make that will appreciate and become more valuable over time.
529 Plan
- Invest in your child's education. Now this is one I am passionate about because I have a massive amount of student loan debt that has prevented me from living my best life and also put me behind the curve of building a legacy for my child. Recent studies show that the US student loan debt is $1.5 TRILLION and black women hold $890 BILLION of this total. Whether college is necessary is debatable, but I can tell you as a person that hires/fires in corporate America and a person whose income has tripled because of a Masters degree, having a degree opens more doors than not. Take advantage of a college savings plan at a young age and prevent your child from falling in the student loan trap that will make it difficult for them to build and pass on generational wealth.
Stocks, Bonds, and the Likes
- Stash money into low-cost investment funds for your children at a young age. Let compound interest do its thing, and your child will be set when they enter adulthood.
The transmission of wealth is often accomplished much earlier in life and in less direct ways than inheritances during late adulthood. Securing your family's legacy will take intentional small steps that will make a substantial impact. Start now! Finish strong! And let's secure the bag our children will benefit from for generations to come.
Were you set up financially for generational wealth? Have you utilized any of these tips to set your children up for wealth? Or were any of these tips utilized to prepare you to receive wealth?
Written by Mykal Steen
Originally published on MommiNation
Kids need a village and moms need a nation! MommiNation serves the tea on everything about motherhood you never thought you needed to know by bringing together many of your favorite mom bloggers and experts all in one place.
