Generational wealth and how to start building it today
In this episode, Carmen Perez covers some simple yet effective ways to start building generational wealth.
Video Transcript
CARMEN PEREZ: When you hear the term generational wealth, you might roll your eyes and write it off as rich people problems. But I promise you, it's for everyone. And you don't need a trust fund to do it.
What's up, everyone? I'm Carmen Perez, and this is "Getting Rich." And today, we're going to be talking about some simple yet effective ways to start building generational wealth.
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What is generational wealth? Well, in short, it's stacking coins and cashing checks. But the textbook definition of generational wealth is as simple as setting aside some cash and investments for your family or future family, if you don't have one yet. The whole idea is taking some of the struggle out of your kids' future.
So whether that's money for college or even money for a new car, it's one less thing that they'll have to worry about. Now, let's cover some of the most effective ways to start building generational wealth, AKA stacking coins. The stock market is perfect for long-term financial planning, because a good investment will grow over time.
If the stock market seems scary, perhaps consider investing in a low cost index fund or index ETFs. These are a basket of stocks that basically mimic the entire stock market. You can invest with as little as $5 to $500. And historically, they have returns of about 8% to 10%.
Kind of a no-brainer, but investing in real estate is one of the best ways you can provide for your family long-term. You also get the nice perk of being able to live in or rent out that investment. Forget everything you've heard on true crime podcasts-- life insurance is one of the best ways to ensure that your kids or loved ones won't be left in financial ruin if something happens to you.
Yes, it sounds morbid, I know. But it's important in building generational wealth for your family members that depend on you. Now, let's meet our next guest who is ready to start crushing their financial future. Jimmy, welcome to the show.
- Thank you so much for having me.
CARMEN PEREZ: Yeah, absolutely. So tell me a little bit more about yourself and what brings you on the show.
JIMMY LAVAR: I live in New York. I'm 20 years old. And I'm looking to build generational wealth for my daughter.
CARMEN PEREZ: I love that you're already thinking about that. It's something that's super important, especially because you have a child. So things to start considering when building generational wealth is trying to get into the stock market as soon as possible.
So whether that's being able to invest for yourself to set yourself up for retirement and not have to pass that burden over to your child-- something that's easy to set it and forget it is a low cost index fund. They're very low risk, and it's something that you can just easily Google. So I encourage you to do that when you get home. Just make a list of low cost index funds that you can start looking into and start investing for retirement.
JIMMY LAVAR: So I do have a question about the stock market. Is there a certain amount to throw in the stock market first? Is that a thing? Or does it depend on just what your income is?
CARMEN PEREZ: It really just is dependent on how much you can do at your income level and what you're going to feel like you're going to need in retirement-- what that looks like. And usually, that's, like, a combination of all your current expenses or where you feel like you're going to land expense wise when you reach 65, 67 age range-- and making sure you have that money saved.
And then the next best thing for building generational wealth is investing in real estate. Investing in real estate is a really good long-term investment choice, because that's something, an asset, that you can pass down to your daughter that typically appreciates in value, right, over the long haul.
But if you don't have all the money right up front to buy a property, there's plenty of apps out there that allow you to do that in little pieces and/or for a fraction of the cost. So something like a Ground Floor, where you can actually utilize or take advantage of being able to invest in real estate without having to go buy the whole house-- so that's another way to get started in real estate.
JIMMY LAVAR: Wow, that's great.
CARMEN PEREZ: So thank you so much, Jimmy, for coming on the show. It's been a pleasure speaking to you. And I wish you the best of luck in your generational wealth journey. I'm so excited that you're thinking about it now. And I think it's going to be fantastic for your daughter.
JIMMY LAVAR: Thank you so much.
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CARMEN PEREZ: So I financial planning for your family's future sounds so serious. And it is. But it doesn't have to be stressful. Here are some things to keep in mind.
Be patient with yourself and the market. If you recently had a child, congratulations. But I'm here to tell you you've got some time to save for the college fund. So don't panic if you don't have anything saved yet. Even regularly putting away just a little bit will add up in the long run.
Want your money to work for you? Well, we covered low risk index funds so you don't have to be that involved and can watch your money grow over time. Building generational wealth doesn't mean you got to be a billionaire overnight. There are no rules or minimums to building a little nest egg for your kids.
So even if you don't end up hitting your goals, your family will love and appreciate the financial help, no matter how big or small. I'm Carmen Perez and this is "Getting Rich."
