How to Build Generational Wealth
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We learn from stories. The narratives that are passed down from our parents and community shape our worldview. The stories we inherit about money — and the mindset they create — form the foundation of our financial reality. If we want to create financial freedom and leave a legacy for our children, we need to share stories about money that empower everyone to take ownership of their finances without shame.
Just like generational wealth, positive money stories and financial literacy have been available to a select few. Access to positive messaging and financial education is limited by gender, race, and where you live in the world. Our mission is to change that: We’re working to close the racial, gender, and generational wealth gap by 2040.
Building generational wealth is a key part of transforming inequalities in society. Regardless of where you are today, the change starts with you.
What is generational wealth?
Generational wealth is defined as valuable assets that are passed down from one generation to the next. From cash and investments to educational gifts and family businesses, generational wealth includes anything with monetary value that’s passed down through the family line.
Generational wealth is sometimes called family or legacy wealth: It’s the type of wealth that’s historically tied to white privilege, pay inequality, and institutional racism — it's been a gift for the affluent who are generally college-educated with a high-income.
People with access to generational wealth have significant financial advantages, including access to higher education without student loans, down payments for first time homebuyers, and freedom from medical debt. In other words, family wealth empowers a young adult to start life free of debt — with funds for the extra things in life. Plus, inheritance can be a nice boost during retirement.
How does generational wealth work?
INTER VIVOS GIFTS
(Latin for “between the living”) refers to money or assets given while the older family member is still living. This is important because it allows a younger family member to get ahead by paying for their education, investing while in their 20s, buying their first home, and setting themselves up for a comfortable retirement.
INHERITANCE
The transfer of assets after the death of a family member — is typically passed down when the recipient is already middle-aged or older. In fact, the average age for inheritance hovers around 60. Most people receive inheritances of $50K or less — while a lucky 2% have access to inheritances of $1 million or more. In other words, the top 2% receive 40% of all inheritance transfers.
How to Build Generational Wealth
It can feel overwhelming to plan for your legacy — especially when staying on top of day-to-day finances is a job in its own right. Setting aside money for your emergency fund, retirement, and home can feel like a Herculean task — and adding smart financial moves to build generational wealth can seem insurmountable. But, with the right tools and support, building generational wealth doesn’t have to add more stress to your life.
Here are our top 7 tips for building generational wealth—
Invest in your own financial literacy — and talk about finances with your community.
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Reading relevant articles and books, listening to podcasts, and building community around finances can give you the knowledge and energy you need to generate wealth. Share your insights — and don’t be afraid to initiate conversations about money.
If you have kids, you’re probably aware they are absorbing everything you say and do. Breaking the money taboo and having honest conversations about money — as well as giving your littles real-life experiences to learn about earning, spending, and even investing — can set them up for success in life, regardless of the assets you’re able to leave behind.
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Get started with the following books: The Little Book of Common Sense Investing, Broke Millennial, A Beginner’s Guide to the Stock Market, Heads up Money (for pre-teens and teens), The Everything Kids' Money Book: Earn it, save it, and watch it grow! (for kids 7-12)
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Listen to our favorite podcasts: "Redefining Wealth", "Clever Girl Finance", "Her Dinero Matters", "Investing Insights", "The Investor’s Podcast Network", "Brown Ambition", and so many more!
Make a budget and a long-term financial plan.
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A recent study found that planners accumulate three times the amount of wealth than non-planners. So of course we recommend downloading Hive today to get started on building your customized plan today, but as a basic starter, we recommend implementing Senator Elizabeth Warren's 50/30/20 budget rule. In her book “All Your Worth: The Ultimate Lifetime Money Plan” Warren maps out the 50/30/20 budget rule to help you manage your money, and save for emergencies and retirement. “The secret?” she writes. “It’s simple, really: get your money in balance.” Divide up your after-tax income — and make a simple budget. It’s as simple as: 1) Spend 50% on your needs; 2) Spend 30% on your wants; 3) Put away 20% in savings.
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Gather your support team.
Whether you hire a financial advisor or sign up with a robo-advisor, expert advice can help you break through the barriers to investing. Even if you plan to head out on your own, paying for one-time consulting fees can set you up for success. If you have a partner, start talking about money with them and make sure your goals are aligned.
Invest your money.
There are so many ways to invest your money. Take advantage of compound interest and start investing today. The earlier you start, the faster your money will start working for you. As you may know, compound interest is the driving force behind investing. Albert Einstein is credited with saying “compound interest is the most powerful force in the universe. He who understands it, earns it; he who doesn’t, pays it.”
Here are some of the most common investments that will help you build your legacy:
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Retirement Accounts
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Stocks
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Bonds
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Mutual and Exchange Funds
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Certificates of Deposit (CD)
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Annuities
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College Funds
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Real Estate
Build a family business.
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If you’re an entrepreneur, your family business is a valuable asset. You can pass down your family business to your relatives and employ your children as they find their way in the world.
Embrace your side hustle.
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Calling all people with side hustles and hobbies! You might be able to generate an income doing what you love. Finding new ways to make money and tapping into your entrepreneurial spirit can be the gift that keeps on giving.
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Plan for life after death.
The planning you do now can be life changing for your family. To build generational wealth, consider buying life insurance, making an estate plan, writing your will, and creating a trust.
Generational wealth and the wealth gap: a problem we want to solve.
“The world is far from the goal of equal opportunity for all: circumstances beyond an individual’s control, such as gender, race, ethnicity, migrant status and, for children, the socioeconomic status of their parents, continue to affect one’s chances of succeeding in life.” – UN World Social Report 2020
Generational wealth plays a huge role in the ever-expanding wealth gap: When you start life with debt, it’s inarguably harder to get ahead; those with generational wealth have opportunities to learn, travel, and buy their first home — and maintain a huge advantage over those who cannot afford the same opportunities.
Here are the wealth gap stats you need to know.
GLOBAL WEALTH GAP
$5
The amount that half of the global population lives off of each day.
The number of people in the world with as much wealth as the poorest 50% of the global population.
26
The world’s wealthiest 1% own 43.4% of the global wealth
1%
UNITED STATES WEALTH GAP
The total amount of wealth owned by the poorest 50% of Americans in the United States.
1.9%
The wealthiest 10% of Americans hold 88% of all available equity in corporations and mutual fund shares in the United States.
10%
RACIAL WEALTH GAP
Average white families are 8x wealthier than the average Black families.
8X
5X
Average white families are 5x wealthier than average Hispanic families.
GENDER WEALTH GAP
The amount women make compared to each dollar a man makes in 2021 — and that gap is larger for women of color.
$0.82
$10.8
trillion per year
The estimated amount of unpaid work accomplished by women.
50%
Men hold 50% more of the world's wealth than women.
22
22 of the world’s richest men have more wealth than all the women in Africa.
Fired up yet?
So are we — that’s why we’re committed to closing the racial, gender, and generational wealth gap by 2040. We believe transparent, shame-free conversations about money are the first step to financial growth — and the key to building generational wealth.
We’re here to give everyone the tools they need to grow — and to create a vibrant financial future for everyone. We hope to inspire new generations of financially savvy individuals with positive money mindsets and empowering stories.
