Generational wealth is exactly what it sounds like; wealth (assets, property, other valuables) which is passed down by at least one generation.
When you hear the term, you likely think of historic ‘old money’ examples
Generational wealth is exactly what it sounds like; wealth (assets, property, other valuables) which is passed down by at least one generation.
When you hear the term, you likely think of historic ‘old money’ examples like the Kennedys, the Rockefellers, or those with highly visible business empires like the Disneys or the Waltons.
The Waltons, known for founding retail giant Walmart, tend to top lists of the world’s wealthiest families as they still own a massive stake in the company (which was the world’s largest by revenue as of 2021).
Generational wealth can certainly reinforce societal status and the differences between the ‘haves’ and ‘have nots’. Many of the successful examples of multi-generational wealth transfer started with a successful business.
However, building and maintaining a successful business is a long, hard road – and while it’s less common for multi-generational fortunes to last without this base, some exceptions do exist.
Generational wealth is a technical term. You don’t need to reach the level of the Waltons to provide building blocks for your family’s future. There are simple steps you can take to leave behind generational wealth, which can still have a significant impact.
There are also common barriers to the successful transfer of generational wealth:
And – market volatility itself. A good financial plan will account for ups and downs, but you may also need to adjust your lifestyle at times to continue the path to long-term success. The amount in the kitty can fluctuate to reflect good times and bad. The Vanderbilts, one of America’s wealthiest families, learned this lesson the hard way during the Great Depression. Despite their vast assets declining, they continued to spend excessively, resulting in a significant loss of their fortune.
There can be negatives associated with generational wealth as well; like loss of work ethic, difficulty finding and maintaining generational relationships and family conflicts.
However, there’s no denying that inter-generational transfer of wealth can help to provide your family with opportunities they may not have otherwise.
Instilling values of financial education, philanthropy and purpose beyond wealth accumulation can help provide balance and perspective.
And if the idea of being the family’s financial steward is overwhelming… have a chat with a trusted investment fiduciary about your goals. It’s a great place to start.
Nick Stewart (Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe, Ngāti Waitaha) is a financial adviser and CEO at Stewart Group, a Hawke’s Bay-based CEFEX and BCorp certified financial planning and advisery firm. Stewart Group provides personal fiduciary services, wealth management, risk insurance and KiwiSaver scheme solutions. Article no. 301.
· This article was created in conjunction with AES International. The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from an authorised financial adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961, or visit our website: www.stewartgroup.co.nz.
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