Harris: Ways to Build Generational Wealth

By Charlestien Harris

February is recognized as Black History Month, and we wanted to join in the festivities by recognizing the rich history that has been established over the years. One of the best ways to honor ancestral history is to take steps to build wealth that will last for generations to come and beyond. Building wealth can be as simple as opening a bank account for the first time or as complicated as understanding that it requires a great deal of planning, patience, and sacrifice. 

The good news is, you can create a brighter financial future, no matter where you currently stand. Wealth building can involve changing your mindset and “fixing” some financial habits that may hinder you from accomplishing the goals you set at the beginning of the year. Let’s take a look at some ways you can begin to build wealth in your family and leave a financial legacy that can last for generations to come.

1. Share Your Financial Wisdom. The greatest legacy you can leave behind is your financial knowledge. Empower your heirs with the knowledge and skills needed to manage and grow wealth responsibly. It’s never too early to talk about money with your children. One example could be playing games around “money lessons” that combine fun with learning. This can also lead to creating positive “money memories” that last a lifetime. Lead by example by showing your family responsible financial management and sharing your financial experiences with them. Become a role model by mentoring young people or early career professionals and promoting community financial literacy programs whenever the opportunity arises.
2. Open a Bank Account. I know this step may not sound like a lot, and it may sound really simple, but statistics show that at least 16 percent of Mississippi households do not have a checking or savings account, which is more than twice the 7.7 percent rate among households nationally. Depositing your money in an FDIC-insured bank account can offer you financial safety, easy access to your funds, savings from check-cashing fees, and overall financial peace of mind. Visit a local bank of your choice to find out what the requirements are to open a bank account and to discover what other products and services a bank may offer to fit your personal and family financial needs.
3. Increase Your Savings. Now you might say, this sounds too easy, but it is really just that simple. By increasing your savings, you can accomplish tasks such as decreasing your debt or increasing your retirement contributions. Sometimes you might feel that saving can be hard, but it doesn’t have to be. Start by saving a little at a time. For example, saving $1.50 a day for a week will net you $10.50. Saving that $10.50 a week for an entire month will net you $42.00. Saving that $42.00 every month for a year will net you $504.00! If we think of this exercise as drinking a soda or bottled water, then you know we have to eat something with it as well, so let’s double that $504 by 2, and now you have saved $1,008.00 for an entire year! Just think about what you can do to bolster your generational wealth by using this method to start saving money.
4. Pay Your Bills on Time. Although 97 percent of Americans pay their bills on time, according to the Federal Reserve, some consumers find themselves paying late fees. Late fees are a common issue that seems to hinder a number of people from accumulating financial wealth. A late charge is a consequence of not holding up your end of an agreement to pay for a good or service by a specified time. These late fees can really add up and keep you from building wealth because they can also affect your ability to obtain credit. One step you can take to alleviate this problem is to set up automatic bill pay when you can. Payment history on your credit report makes up 35 percent of your score. When you take a closer look at it, that is 15 points from being half of your entire credit score!
5. Invest in Life Insurance. Life insurance can be used for much more than just simply covering your final expenses. Whole life insurance pays a benefit upon the death of the insured while also accumulating cash value. It can also serve as a form of inheritance by leaving money to the named beneficiaries, thus leaving them financially secure and having the funds to pay off remaining debt and other financial obligations. This can free up other resources and allow your remaining family the ability to use their regular income for ongoing expenses incurred throughout the year. Be sure to comparison shop for the best rates and terms when you are looking to purchase any type of insurance. Different companies offer different options; just make sure the policy you purchase best suits your needs as well as your family’s.
6. Consider Purchasing a Home. A home is the single biggest investment most people ever make. Passing a home on to the next generation is an amazing gift that builds generational wealth. This means that you are leaving your children some real estate. Not only does real estate provide shelter for you and your family, but it also tends to appreciate in value over time. Home equity can increase substantially over time as you pay down your mortgage and your property’s value appreciates. Some of the different ways to pass down property include wills, trusts, joint ownership, and transfer-on-death deeds. Although homeownership may not be for everyone, it can be a viable option for those who choose to go that route to continue to build generational wealth.

Generational wealth is financial wealth and assets that can be passed down from one generation to the next, giving your heirs the gift of greater financial security. You also have to teach the next generation to make good decisions with money. They need to understand how to spend it, preserve it, and invest it. You have to instill in the next generation a framework for making wise financial decisions. 

For more information on this and other financial topics, you can email me at Charlestien.Harris@banksouthern.com or call me at 662-624-5776.

Until next week – stay financially fit!

Charlestien Harris is our financial contributor, a financial expert with Southern Bancorp Community Partners whose articles are seen in a number of publications around the region.