Generational Wealth Starts with You

“Generational wealth” may be a modern buzzword, but the concept has been around for centuries, especially among the wealthy. At its core, generational wealth is about estate planning and ensuring financial security for future generations. When done correctly, it can give your family the financial security to chase their dreams.

What Is Generational Wealth?

Generational wealth is any type of wealth that passes down to one or more family members when a person dies. Money, real estate, and stock portfolios are just a few types of assets that can be inherited as generational wealth. If you’re thinking about buying a house, investing, or planning your estate, then you’re already taking steps toward building generational wealth. But wealth alone isn’t enough—it takes careful planning and financial education to make it last.

Simply Leaving Money Isn’t Enough

A major mistake in estate planning is assuming a large inheritance alone will build generational wealth. John H. Nebeker writes that 70% of inherited wealth is depleted by the second generation and 90% by the third. Families who successfully retain wealth take a different approach; they replace gifts with structured loans and entitlements with opportunities.

William Vanderbilt II, a member of one of America’s wealthiest families, famously reflected on the downside of inheritance: “Inherited wealth is a real handicap to happiness.” Without financial education and structure, wealth can become a burden rather than a blessing.

Don’t Forget to Fund Trusts

Trusts are excellent tools for wealth preservation, but they only work if properly funded. Many families create trusts but fail to transfer assets into them, rendering them useless. A well-funded trust, guided by an experienced estate planning attorney, ensures assets are managed according to your wishes and benefit future generations.

Good Money Habits Begin in Childhood

Financial literacy starts young, and even kindergarten-aged children can begin learning the basics of managing money. The American non-profit Jump$tart Coalition for Personal Financial Literacy outlines three key concepts:

SPEND: Teach children the value of money by associating it with effort. Assign simple chores like tidying their toys or helping to water plants as a way to earn small rewards. Explain that people also receive money as gifts during special occasions, such as Chinese New Year ang baos, birthday gifts, or Hari Raya green packets, and that this money can be used wisely.

SAVE: Encourage children to make decisions about spending and saving. Open a POSB My First Savings Account or introduce them to the Child Development Account (CDA), where the government matches contributions. Help them set a savings goal, such as a new toy or an outing, and track their progress together to show how small amounts add up.

SHARE: Introduce the concept of generosity by letting children donate a small part of their savings to local charities like the Community Chest, Giving.sg, or animal shelters. Teach them that value isn’t only tied to money.

Sources:

1. https://www.britannica.com/money/generational-wealth-building

Disclaimer:

The information provided is for general information only and does not constitute financial advice. While we have taken care to check the source of the information, we cannot guarantee that the information is accurate, complete, or will suit your individual financial needs. You are advised to seek professional assistance.