Generational wealth is a crucial way to build wealth within a family. The idea stems that the older generation builds wealth that is passed down to their family when they pass. With this wealth, the next generation can focus on building up the wealth they inherited because it can help them pay for their life and focus on wealth building. This breaks the cycle of living paycheck to paycheck but takes some serious commitment from the entire family.
For example, let’s say that your parents have to build generational wealth and are able to pay for your college degree. Without having student loan debt, you are able to start your working career off financially better than most individuals. You may be able to invest and buy real estate instead of paying student loans at a much younger age than your peers. When your parents pass, you will inherit their wealth, allowing you to focus on building a business, investing, or buying real estate to generate more income. Then, the pattern continues where you can provide more for your children, and your children can focus on wealth building as well.
