Let’s Talk About Building Wealth to Last
Q: What is the best way to build generational wealth?
If you want to know how to build generational wealth, then you’re likely a driven and success-oriented person. You want a clear pathway that will allow you to build wealth that can be passed down to future generations. To build and protect generational wealth, you must create and execute a legacy plan.
By creating a legacy plan, you not only protect your financial contributions but also reinforce the lessons you want to instill in your family. A legacy plan helps your heirs manage and grow the wealth you’ve worked hard to create.
So today, I’ll share seven steps that everyone needs to take to build and protect generational wealth.
Written By Tiffany Woodfield, Financial Coach, TEP®, CRPC®, CIM®
7 Steps to Building Generational Wealth
1. Establish a Clear Vision and Goals for Wealth
The first step to building generational wealth is to establish a clear vision and set specific goals for what you want to achieve.
This could mean getting a second property, launching a business, or saving for retirement.
Having concrete goals means you can break down your big dreams into small, manageable steps. Having a clear focus will motivate you and make it easier to track your progress. There will be plenty of bumps in the road as you work toward leaving a lasting legacy for your family. So you’ll want to have a clear goal and vision that keep you going!
2. Build a Strong Financial Foundation
You need a solid base to grow wealth successfully.
Just like a house, your wealth is only as strong as the foundation it’s built upon. A strong foundation includes:
- Debt Management
- Budgeting
- Emergency Funds and Cashflow
Debt Management
To free up more money to invest in your future, keep track of what you owe.
Don’t let debt get out of control, and make sure to pay off high-interest debts (like credit cards) first so they don’t add up and become a bigger problem.
Budgeting
A budget can empower you to make better financial decisions because you know exactly where your money goes each month.
Many people who start budgeting are surprised to find “money leaks.” A money leak is an area where you didn’t realize money was going out. Finding these money leaks is like finding money in your pocket!
By not spending on things you don’t want, you’ll have more for what truly matters to you. And you’ll be able to reach your goals more quickly.
Emergency Funds and Cash Flow
An emergency fund is a savings account set aside for unexpected expenses.
It creates a cushion to help prevent you from going into debt. Good cash flow management is important. You need to know how much is coming in and going out each month.
Quick Video: 3 Tips to Start Budgeting
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3. Invest Wisely for Long-Term Growth
To build generational wealth, you must avoid trying to “time the market.”
Instead, allow your money to grow over time. Think of investing as planting seeds today to enjoy your garden of wealth tomorrow.
In addition, it is important to diversify your investments across different asset classes, like stocks, bonds, and real estate. This helps to reduce your risk, which enables you to stay on course for the long term. When you have sufficient assets, it helps to work with a financial professional.
They can give you advice that fits your needs and goals.
Typically, if you have $1M or more in inevitable assets, it’s time to start looking for a qualified financial advisor. Look for a fiduciary financial advisor who is a CFP or Portfolio Manager.
4. Consider Leveraging Life Insurance as a Wealth Transfer Tool
In Canada and the U.S., life insurance can be a tax-efficient way to transfer wealth to your beneficiaries.
Life insurance is often used in estate planning for the following reasons:
- To create an estate for your family to cover expenses when you’re gone.
- To equalize an estate for family members when a business is involved.
- To create liquidity in an estate so a large asset or business doesn’t need to be sold after you pass away.
People are often suspicious of life insurance. However, it can be a very smart way to leave more to your heirs. Keep in mind that life insurance proceeds one receives as a beneficiary aren’t includable in gross income. In other words, you don’t pay tax on a life insurance payout.
5. Prioritize Estate Planning and Legal Structures
Estate planning is essential if you want your assets to be distributed according to your wishes.
By having a solid estate plan in place, you can reduce potential conflicts among family members and save on taxes. Keep in mind that a will is not an estate plan. Neither is a trust.
A will outlines how you want your belongings and assets to be divided after you pass. Trusts are flexible legal structures. They let you control how your assets are managed and shared while you’re alive and after you pass away. With a trust, you can set specific rules about when and how your beneficiaries receive their inheritance.
An estate plan will cover all aspects of your estate.
6. Create a Family Governance Plan
A family governance plan is key. It ensures that everyone understands financial decisions and family goals.
A plan establishes a clear system for decision-making and communication among family members. This helps prevent misunderstandings and conflicts.
Educating the next generation on financial literacy and wealth stewardship is important. Aim to empower them with the knowledge and skills needed to manage and grow your family’s wealth responsibly.
7. Protect Wealth Through Risk Management
Risk management involves identifying potential risks that could impact your assets.
Some examples include unexpected medical expenses, accidents, or market fluctuations. An effective way to manage these risks is by getting the right insurance coverage.
For example, you may need health, home, and liability insurance. The right insurance can safeguard your finances from significant losses.
Common Questions
How is most generational wealth created?
Most generational wealth is created through long-term investments, strategic financial planning, and smart asset management. Families often build their wealth by putting money into things like real estate, stocks, or starting their own businesses. They also avoid excessive debt.
What is the three-generation rule for wealth?
The three-generation rule for wealth suggests that family fortunes often disappear by the third generation. The first generation works hard to build wealth, and the second generation has some success managing it.
By the time it reaches the third generation, it can fall apart. The third generation tends to lack the drive, discipline, and financial knowledge to maintain and grow wealth.
What is the most common way to build wealth?
The most common way to build wealth is through a combination of saving, investing, and earning a consistent income. People often start by saving a portion of their earnings and then invest that money in assets like stocks, bonds, or real estate, which can grow over time.
What are the best assets to build wealth?
The best assets to build wealth include real estate, stocks, and investment accounts, which earn passive income and grow over time. Consider a diverse range of investments, taking advantage of compounding returns and investing for the long term.
Financial Stability & Legacy
Creating generational wealth isn’t just about accumulating assets.
It’s about leaving a legacy of financial stability, knowledge, and opportunity for the people who matter most to you. By taking intentional steps now, you can ensure that your wealth continues to grow and serve your family for generations to come.
The key to lasting wealth isn’t a secret—it’s a combination of smart planning, disciplined investing, and thoughtful legacy building. Whether you’re just starting or refining your financial strategy, the best time to take action is now.
Every decision you make today brings you closer to a future where your wealth is protected, your loved ones are secure, and your financial goals become a reality.
So take the next step. Set your vision, build your foundation, and put a plan in place that ensures your hard work lives on.
You have the power to create wealth that lasts—and it starts with the choices you make today!
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Read More:
💎 How to Establish Generational Wealth
💎 How to Build Generational Wealth Successfully
💎 What Amount of Money Is Considered Generational Wealth?
💎 Why Is Generational Wealth Important
About the Author
TIFFANY WOODFIELD is a financial coach, cross-border expert, and the co-founder of SWAN Wealth based out of Kelowna, BC. As a TEP and associate portfolio manager, Tiffany has extensive experience working with successful professionals who want to leave a legacy and enjoy an adventurous, work-optional lifestyle. Tiffany combines extensive knowledge from her background as a financial professional with coaching and her passion for personal development to help her clients create a unique path that allows them to live their fullest potential. Tiffany has been a regular contributor to Bloomberg TV and has been interviewed by national and international publications, including the Globe and Mail and Barron’s.