Opinion: Unpacking generational wealth – and how to create it

In a recent survey from Ameriprise Financial, more than 3 out of 4 Americans said they have taken at least one step to build generational wealth. But what exactly constitutes generational wealth – and how can you achieve it?

The most common answer, registered by 44% of survey respondents, is wealth in excess of $500,000 that’s passed down to loved ones. Depending on your financial situation, half a million dollars may or may not sound like a lot of money.

But one thing is clear: No matter how much you intend to one day bestow upon your family and friends, it helps to have a plan.

Plan A
If you, like 68% of the Ameriprise survey respondents, say passing generational wealth onto your heirs is important, there are some things to keep in mind.

Here are five strategies for growing generational wealth:

1. Be a strategic saver. Rather than leaving wealth accumulation to chance, strategic savers set goals and work to actively increase their savings. They make regular contributions to savings accounts. Active saving curbs spending and influences earning behavior. They may defer purchases, work longer, pursue higher-paying employment or make other choices, and sacrifices, to ensure their savings goals are met.
2. Invest in stocks. Investors who are serious about income growth utilize the stock market. Most experts recommend a buy-and-hold approach to optimize earnings over time. A risk-adjusted, diversified and balanced portfolio can help investors meet their investment goals.
3. Invest in real estate. Historically, real estate property values have increased over time, making homeownership a leading method of wealth accumulation. Investors also may diversify their portfolios with real estate investment trusts and other purchases of property.
4. Pass along financial wisdom. Financial values are another important asset to pass along to heirs. Many families find it beneficial to discuss their financial decisions with their adult children and stepchildren. Clear communication can help establish realistic expectations and avoid surprises and conflicts when it comes time to pass along your assets.
5. Consider giving while still living. Plans for sharing generational wealth can include giving now rather than waiting to hand down assets after death. Beneficiaries are often adult children but also can include charitable organizations. Giving in the present can satisfy the desire to help now and enable you to see the impact of your generosity. That said, it shouldn’t come at the risk of your financial security, so make sure you have the means necessary before writing a check to your favorite cause.

Lifelong effort
Building generational wealth is a lifelong process. Along the way, an experienced financial adviser can help you develop a financial plan and set achievable goals aligned to your estate planning needs. Your adviser can work with you and your estate planning attorney to ensure your will facilitates your wishes for sharing generational wealth.

Paula Dougherty is a certified financial planner and private wealth adviser with Achieve Private Wealth, Ameriprise Financial Services LLC in Springfield. She can be reached at paula.j.dougherty@ampf.com.