Grow Your Money: 6 Ways to Create Generational Wealth

Did you know that, in the second quarter of 2022, the average wealth of U.S. Millennials and Generation Z was $209,000? Generation X had more, at $235,000, but Boomers had the most, at $237,000.

All that should make you want to build wealth, regardless of age. It’s even more vital if you wish to leave your loved ones with a significant financial advantage.

Fortunately, there are many ways to grow your money, but you must invest it now in the right assets. After all, the sooner you place it in an investment, the more time it can accumulate profits. And the more profitable your investments, the more significant your wealth can get.

Below, we’ve shared the top personal finance tips to help you get started, so read on.

1. Start Saving Now

A comfortable retirement now requires at least $1.25 million for many Americans. However, that depends on your age; if you’re in your early 20s, you might need more by the time you retire. Still, aiming for that figure is wise, as you can use it as a benchmark for your goal.

No matter how old or young you are, the golden rule is to start saving as early and as much as possible. The sooner you do, the sooner you can capitalize on the effects of compounding growth and returns.

You can start by putting away some of your earnings in a high-yield savings account. Another is to take advantage of traditional, ROTH, or simple Individual Retirement Accounts. There’s also the option to save through traditional and ROTH 401(k) plans.

2. Purchase a Home

Homeownership is one of the best ways to build wealth, as houses tend to appreciate over time. Indeed, the national appreciation values of homes in the U.S. average between 3.5% and 3.8% yearly.

For instance, suppose you buy a home worth $200,000 now. With an average appreciation rate of 3.5% to 3.8%, it could be worth $207,000 to $207,600 by next year. After about 15 years, its value could be almost or even more than twice what you paid when you first bought the house.

From there, you can sell your house and reap the profits from its increased value. You can then use part of the sales money to buy a smaller, lower-priced home and invest the rest in other assets.

Alternatively, you can buy and move into a second home if your financial resources allow it. You can then keep your first home and turn it into a rental property. Rental properties provide passive income opportunities through monthly rental payments.

3. Invest in Stocks

Also called equity, a stock is a type of security that gives a stockholder a portion of ownership in a company. It’s one of the most common investments in the U.S., with about 58% of Americans owning at least one. That includes one in every four households with a combined annual income of $40,000.

Stock investments let you make more money on the side when they appreciate. Some also give you dividend payments, a share of a company’s earnings.

One of the most crucial steps to choosing a stock is picking an industry that interests you.

For example, let’s say you love theater, musicals, and other live performances. If so, a Las Vegas entertainment investment opportunity may be an excellent choice.

After all, Las Vegas is the world’s entertainment capital; millions visit it each year. Thus, buying stocks from one of its entertainment companies can yield generous returns.

Another example is purchasing stocks from a company involved in renewable energy. These include organizations producing or manufacturing wind, solar, and hydropower technologies. Their stocks may be a viable investment as the world combats global warming.

4. Buy Bonds

Unlike stocks, whose values fluctuate wildly, bonds provide more predictable income streams.

Bonds are like loans that investors “lend” to companies or governments. In return, the borrower promises to pay the lender interest over the bond’s life.

Once the bond matures, the borrower also pays the principal, the loan’s face value.

Bonds can be short-, medium-, or long-term. Short-term bonds mature within one to three years. Medium-term ones mature within ten years, while long-term bonds mature much longer.

5. Get Cash-Value Life Insurance Policies

A cash-value life insurance policy is life insurance with a cash-generating component. The insurance aspect lasts for the policy owner’s lifetime. The cash value element, in turn, grows in worth over the policy’s life.

Cash value life insurance policies often require fixed premium payments. A portion of those payments goes toward a cash value account, while the rest is for the policy’s cost. For these reasons, such policies cost more than term life insurance.

The great thing about cash value life insurance is you can withdraw from it, usually after ten years. Then, you can use the money for emergencies, investments, or home improvements. It can also help supplement your retirement income or pay your policy premiums.

Alternatively, you can take out your policy’s entire cash value. This terminates the coverage, which is why you’d want to get more than one policy. That way, even if you end one to use the funds it has built, you still have another to fall back on.

6. Start a Family Business

About a third of all family-owned businesses make it to the second generation. Although the rate is lower for the third generation, it’s still a considerable 12%.

That makes a family business one of your options to build generational wealth, as you can pass it down. From there, your loved ones can continue making money through it if they keep running it. And even if they don’t, it’s still a viable source of wealth since they can sell it in the future.

Grow Your Money Today

Remember: If you don’t grow your money now, you stand to lose a lot of growth opportunities. In addition, you may face significant difficulties along the way, especially in retirement. Indeed, 47% of U.S. households nearing retirement say they’re not financially sufficient.

So, start building wealth for yourself and your family as early as now. The sooner you do, the sooner you can reach your retirement goals and have wealth to pass down to your loved ones.

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