When you wanted to go to college, start your business, become an investor, or make a down payment on your first home, where did you get the money you needed to do those things? Did you have to take a student loan to get through college? How long did you have to save to buy your first home? Did you need a bank loan to start your business?
For most people, the answers to these questions will be yes. Most Americans cannot do the things they want in life for the simple reason that they do not have the money they need. Like it or not, access to cash is one of the major factors in an individual’s level of personal happiness and success.
But here is a thought. What would it be like if your kids didn’t have to worry about how they would get through college because you provided the funds beforehand? How would it feel if you could gift your son or daughter the money to make the down payment on their first home? What if you left them substantial assets as their inheritance at your passing?
These are the kind of things you maybe wished your parents did for you. Even if you are well-off today, you would probably be more successful if you inherited wealth. Just as we inherit genes from our parents, it can be extremely helpful to inherit some wealth. When parents transmit wealth to their children, they create generational wealth.
Generational wealth and why it matters
Generational wealth is important because it helps to fulfill two deeply-ingrained human needs:
- Nothing engages the heart of parents more than the desire to see their children do better than they did. Not only do they want their offspring to have more success, parents often want their children to have the help they did not receive when they were younger. Inherited wealth is one of the best ways for parents to fulfill this desire.
- The concept of generational wealth provides an opportunity to build a legacy that outlives us. This legacy can manifest in two ways; you can be that person in your lineage that becomes the turning point in the family’s fortunes, and generational wealth ensures you can keep supporting causes you value long after you are gone.
The best investment for building generational wealth
As already stated, some of the things you can leave to your children include savings, cash, life insurance, stocks, antiques, jewelry, or even a business. One problem with cash and savings as an inheritance is that the value of money is constantly eroded. Antiques and jewelry have to be sold before their value can be realized. Life insurance depends on the passing of the insured person.
But real estate as means of building generational wealth does not have all these limitations. As Upkeep Media explains when you invest in real estate:
· You secure a steady source of income
An investment property generates steady income through rents. Unlike stocks, which do not generate sufficient and consistent income, a single well-maintained property can serve as a source of income for several generations. You have to sell the investment for assets like expensive art to profit from it.
· You are sure of consistent value appreciation
Due to the limited supply of land and the many practical uses of buildings, real estate values are not as susceptible to economic shocks as the value of stocks. The price of a stock can fall to zero, but this will never happen to a building (unless it is destroyed). Real estate prices may fall in the short term, but
they always rise in the long run. Real estate retains its value better than stocks.
· You don’t need to be an expert
Unlike running a business, almost anyone can own rental property. Businesses also require time to become profitable, and there is a chance that they will fail. Conversely, you can start earning income as soon as you buy real estate. Your know-how or the abilities of your heirs are not a huge factor when investing in and/or managing real estate.