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Three Techniques for Building a Unique, Life-Changing Legacy

December 08, 2022
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What do ancient palaces, downtown skyscrapers and the new homes and schools being built in our Dallas suburbs have in common? They all rely on strong and sturdy foundations to support the construction of buildings that will be used for generations to come. 

In a lot of ways, building multi-generational wealth is like building a new home, school or place of worship. The architects and engineers who design and evaluate the foundations of a construction site are similar to the advisors and wealth managers that work with clients to lay the cornerstones for sustainable wealth and financial security. It’s these foundations, formed by the decisions you make today, that will benefit children, grandchildren, charities and other institutions long into the future.

There’s no single path to building multi-generational wealth. Doing so successfully involves a number of steps, as well as careful guidance. 

The Importance of Building a Legacy

What defines intergenerational wealth and why is it important? Unlike the assets and investments that you save, invest and liquidate over the course of your lifetime, multi-generational wealth is destined for a greater purpose. It’s passed along from one generation to the next, and is also called family wealth or legacy wealth. 

This type of wealth can take many forms, from college savings accounts to inheritances to properties that are meant to provide a financial boost to beneficiaries of your choosing. It’s important to pair assets with education, because wealth mixed with sound guidance has the best chance of growing and making a difference in the lives of future generations. 

Consider the financial mistakes that could have been avoided or the opportunities that would have been capitalized upon in your own lifetime with the right combination of financial literacy and financial means. Building a strong financial foundation now will give future generations the chance to succeed in the years ahead.

Some of the most common methods for establishing and passing along intergenerational wealth are business development, financial education and creating multiple sources of income. 

Let’s take a closer look at each of these and their impact on your ability to build a strong financial legacy. 

Growing a Thriving Business

America’s economy is built on family businesses. They account for 64% of the U.S. gross domestic product and 78% of all new job creation. Not only is establishing a family business good for our country and the here and now, it’s a prime mechanism for passing along wealth, too. 

More than 30% of all family-owned businesses are passed along to the next generation and 12% will be viable into the third generation. To increase the strength of your business so that it can support the financial security of future generations, it’s important to work with a financial advisor and lay out a plan for the future. 

Family businesses tend to retain talent better than their competitors and are a vehicle for passing along wealth and the values that helped cultivate it. Incorporating the proper financial guidance into a family business can plant the seeds for subsequent generations of savers, entrepreneurs, philanthropists and investors.

Teaching The Next Generation 

Building wealth that grows through multiple generations requires more than financial assets.

Raising financially independent adults is critical to establishing a legacy, and research indicates you can begin instilling sound financial habits in children as early as the age of five. Teaching kids about personal finance and helping establish responsible saving and spending behavior is an important layer in the foundation of your legacy. 

Engaging in age-appropriate conversations around money will help younger family members overcome the mystery and fear factor of finance. Discussing topics like budgeting, needs versus wants, and short- and long-term goals are an important part of one’s financial journey. 

Learning about investing, debt management and other advanced personal finance concepts is a future-oriented means for equipping the next generation to manage the wealth for which they will eventually be responsible. And keep in mind that failures can be salient learning opportunities, so sharing losses as well as wins can be immensely beneficial.

Creating Multiple Streams of Income

We practice what we preach when it comes to diversification, and that includes diversifying the sources of income that fuel your wealth. In addition to business income and savings, wealth can come from real estate, investments in public and private vehicles and even intangible assets like business experience, data and information. 

Just as a builder would never rely on concrete without rebar or lumber without nails, a legacy needs a variety of materials to successfully weather market downturns and changes in technology. Our advisors are well-versed in the different types of investments and structures around those investments, ensuring that your legacy will have a lasting impact.

While the right investments and assets will provide diversification for the future, there are other products designed to provide a strong foundation for multi-generational wealth. Life insurance, while sometimes overlooked, can be as important as solid bedrock to the foundation of your family’s wealth. Similarly, the right vehicles for passing along wealth, like trusts, stand as important components in building intergenerational wealth and often operate as income sources for the next generation.

Today’s Investment is Tomorrow’s Promise

Generational wealth is affected by many factors, including the assets you hold, the financial education and behavior you encourage and the values that inform your decisions. As you and your family set out to provide for future generations, investing in, building upon and protecting those assets and behaviors are essential to transferring financial wellness from one generation to the next.

Guidance from the right advisor can maximize your ability to build a foundation for those to come. At BFS Advisory Group, we work with you to incorporate your purpose, your vision and your expectations into the plans and designs that will establish a powerful, wealth-building legacy and fuel your family’s financial well-being for decades.

The planning and expertise provided by our advisors complements the vision and foresight of our clients. Whether we’re working together to establish and grow savings, leverage public and private investments, launch and expand businesses or multiply other income streams, we’re here to help you build a legacy that will last—and one that’s as unique as you and your family.

Debra Brennan Tagg is a CERTIFIED FINANCIAL PLANNER™ Professional and the creator of the DBT360 Financial Plan, a proprietary program that helps her clients prioritize their goals, leverage their resources, and address their risks. She is the president of BFS Advisory Group and teaches the public and the financial services industry about the importance of values-based financial planning and investor education.