Generational wealth can provide your family with a strong financial foundation – and the security, freedom and opportunity that come with it – well into the future.
Building that financial legacy may feel daunting for those juggling financial demands today. The goal may seem especially daunting for Black families who, on average, have lower net worth than that of white households. Long-standing racial inequities contribute to this wealth gap, which includes historically lower wages and a disparity in inheritance. White households are far more likely to inherit family assets with higher economic value, and to receive significantly larger bequests, than Black families.
Despite these challenges, you can take steps to create wealth that will position your children and grandchildren for financial wellbeing. No matter where you sit now on the wealth spectrum, you can build a generational legacy – including cash, stocks, and real estate – by budgeting, planning, investing, and making efforts to protect your assets.
Here are talking points from Parris Hall, Head of Wealth Banking Solutions at TD Wealth® on how to start your wealth-building journey.
Budget with Purpose
Your financial journey starts with knowing where you are and where you’re going. You need to know what you have now and define and set goals. Take stock of your current circumstances, from income and cash to securities and real estate. From there, you can set your financial objectives and plan a course forward.
You’ve got to plan with a clear understanding and differentiation between your needs and your wants, and it’s got to be goals-based. This allows you to stay focused through ups and downs.
The key lies in making efforts to protect and enhance income while managing debts and expenses. Whether your income is $40,000 or $400,000, you've got to know where your money is going and direct it with purpose.
Take on debt only where it makes sense. Debt can be a useful tool if you’re using it for increased purchase leverage of appreciating assets, such as purchasing or improving real estate. While even the housing market doesn't always go up, a home can often be an appreciating asset that can provide a foundation for building wealth.
Paying for college can also represent a beneficial investment. When you spend on an education that enables a higher paying job, that’s an appreciating asset that pays off through generations.
On the other hand, avoid debts that increase your burdens and drain your finances. Credit cards and other high-calorie debt should be carefully monitored and limited in your financial diet.
Learn and Invest
Many of us didn’t grow up learning about investing and other financial services as a topic of discussion at our dinner table or in our homes. Others distrust financial institutions because of previous discriminatory practices.
By tapping into expert resources, though, you can gain the tools and knowledge to enhance your wealth.
Banks offer various resources – free or low-cost digital apps and experienced professionals at neighborhood branches– that can provide basic financial education and information.
As you become more knowledgeable and are ready to invest, you can benefit greatly from seeking goals-based advice and investment strategies from registered investment professionals.
Protect Your Wealth
No matter how much wealth you amass, it only takes one slip and fall to have that go right out the back door. It’s important to take steps to protect your assets against accidents and other risks and to ensure your wealth is properly transferred to heirs.
Property, life, and disability insurance can shield your assets should adversity hit. Insurance is your friend.
Make sure you have a will and that your assets are held in a way – in trusts, for example – that may help to protect them and aligns with your long-term goals. That’s where expert financial advisors, accountants and lawyers can become important partners.
No matter where you are, understand your assets and leverage experts around what you need to do to protect your wealth.
While job loss, unexpected expenses, market swings or financial disappointments can place hurdles in your way, your wealth management, the way you’re saving and investing and the assets that you're buying and where you're headed, that’s really a long-term journey, and you must work to stay on course.
Do for Others
As your financial situation improves, invest in your family and community by helping others do better too.
In other words, when you’re on the economic rise or "come up", you can help "pull up" others along the way.
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We hope you found this helpful. This article is represents the opinion of the author and is for general educational and informational purposes only and is based on information available as of February 2024 and is subject to change. Any references to third party programs and/or services are informational and may not apply in your specific circumstances. This content is not intended to provide financial, investment, legal, or tax advice or to indicate that a TD Bank, TD Bank affiliate, or third-party product or service is available or right for you.
For specific advice about your unique circumstances, consider talking with a registered financial professional.
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