Building generational wealth from scratch
In Part 1, we covered building generational wealth and how race plays a part in Bermuda’s wealth gap. Now, we’re back to talk about how to grow generational wealth from scratch and how to stay on track for financial success
It is estimated that 70 per cent of families lose their wealth in the second generation and 90 per cent lose it in the third. Those numbers are alarming but preventable. A successful investment strategy begins with understanding how your money can work for you and learning how to maximise your hard-earned cash. The most important step towards sustainable savings is teaching those lessons to the next generation.
How to grow generational wealth, even if you are just getting started:
1,Start with a plan: creating a family financial plan which includes diverse sources of income, such as investments and real estate, should give you a clear picture of your present and future position. It’s OK to start small, with a plan and a budget, followed by a long-term plan to grow your retirement savings and secure life insurance to protect your future
2, Seek professional support and education: you can find good free financial advice online, but you can also seek guidance from your banker, your insurance and pension providers, as well as financial advisers who can dispel any fears you may have around financial matters and quickly get your money working for you
Remember that generational wealth is not defined by how much money you have. It is not defined by a trust fund, piece of property or inheritance. It can be as simple as a parent teaching their child how to budget, helping with a down payment on a home or contributing to your grandchild’s college tuition. If you have inherited wealth, don’t try to figure it all out on your own.
When you identify what you don’t know, it is easier to find professionals that can help.
Creating an emergency fund and growth options for your money
Aggressively saving for emergencies, investing wisely and considering multiple streams of income will yield the best results for growing wealth. It is a myth to assume you can invest only if you have a large amount of money. Planning for your children’s education, purchasing a home and saving for retirement are the three most common financial goals, and require different timelines and financial tools. There is no one-size-fits-all solution. Create different systems to meet your unique needs, such as utilising a savings account to accumulate funds for a down payment on a home or leveraging an investment portfolio to fund your retirement. Consider sectioning your money into separate financial goals and creating a growth timeline for each one.
Traditionally, people have seen banks as the primary option for financial security but there are many ways to use other sources for financial growth. For example, subscribing to employee benefits that can enhance your savings. This may include share purchase plans, matching plans, stock options and, most commonly, adding additional contributions to your existing pension plans — a low-cost way to invest for mid and long-term goals.
Key points to action your wealth growth:
1,Be prepared: have a clear personal wealth plan as well as a strategy for long-term family financial wealth. It is important to map out how you will save, invest and spend your money each year. If possible, create multiple streams of income
2,Invest wisely: invest what you can and invest early, but ensure you speak to a qualified financial adviser who can guide your investments and help you understand what you are comfortable pursuing and how much it is going to end up costing you
3,Communicate: educate the younger generations, update your beneficiaries and your will, and pass on any lessons to younger family members
4,Seek professional advice: a professional can help you meet long-term investment goals, ensure that you are diversified and have a plan designed for your personal financial needs. It is also helpful for discussing impactful financial decisions, such as whether to rent or buy a home and how insurance policies, retirement pensions and wills can assist a family in retaining wealth
5, Have an emergency fund: this is the most important piece of advice. Create a savings account that is not tied up in investments — a sum that is accessible at any time with no penalty in case of emergency.
Taking these actions can be financially freeing and a stepping stone towards long-term security.
Nurturing your generational wealth leaves more room for what matters most: you and your family.
• Angela J. Joell, is the Investment and Client Education Manager at the Argus Group. She joined in June 2016 after more than 30 years in the banking industry. Her parallel career in adult education has her delivering workshops in professional and personal development on Pension Legislation, Market updates and pension products and services
• Melvin Nusum is the Head of Client Management at the Argus Group where he provides employee benefit and insurance solutions. He has worked within the financial services industry for more than 13 years, including HSBC, Wells Fargo and New York Life, helping individuals secure their financial future and support corporations in improving their cash and investment portfolios
• The content in this article is for informational purposes only and is not intended to be a substitute for professional financial or investment advice