How to Build Generational Wealth - YouTube

How to build Generational Wealth Being born with a silver spoon  

in your mouth is usually used as an insult  aimed at members of high society families.  

People born into wealth seemed to have everything  given to them since birth, but what many people  

quickly forget is the sacrifice and hard work that  the family's founder went through, to create that  

lifestyle and privileges. These founders toiled  and sacrificed to create something that they  

can pass onto future generations by creating  generational wealth. A common theme amongst  

every parent is that they all dream of creating a  life for their children where they would be happy,  

healthy and never lack anything. A life where  all their needs would be met and fulfilled.  

This is also what wealth family founders intended  for their family and generations to come. To allow  

their families to have an easier time and to  have a better life than the previous generation. 

What is generational wealth, and how  is it different than personal wealth?  

Generational wealth is a concept where a  family passes on a significant amount of  

assets onto future generations. The  family's generational wealth or more  

commonly known as the family fortune is built  up years of work and sacrifice. In contrast,  

there are many millionaires and billionaires  around the world that are self-made.  

This means that they relied upon their  hard work to grow their fortunes.  

When it comes to this group of people, the vast  majority of them gained their fortunes through the  

same hard work and sacrifice that the founders  of a family fortune went through. Then there  

are the lucky few that stumble into their wealth,  such as the winners of a national lottery; though  

history has proven that many of these lottery  winners won't keep their fortunes for long. 

Like the lottery winners, some millionaires  and billionaires will eventually lose all their  

wealth, some due to illegal business activities  and others to bad investments. One of the primary  

constants of personal wealth and fortune is  that many people don't plan for the long term,  

while those who envision that future generations  use their wealth do think beyond their life. 

Who has generational wealth? The names of the  families that have generational wealth read like  

a list of who's who of the rich and powerful.  One of the most notable families that have  

generational wealth is the Rothchild family.  The family rose to prominence in the 1760s  

when the Mayer Amschel Rothschild established  his banking business. The family then had the  

next generation expand their business to five  different European courts. As time went on,  

the family's wealth began to grow, becoming one of  the largest familial fortunes in the modern world. 

There are also examples of individuals  that created generational wealth so that  

future generations, no matter who they were,  could use it if they match a set of criteria.  

Benjamin Franklin, one of the American founding  fathers, left the city of Philadelphia and Boston  

$2,000 to split. Though that amount of money  was considered significant even back then,  

Franklins will demanded that, the cities  would not get the money for 200 years.  

When the cities received the capital in  1990, the trust had grown to $6.5 million. 

A more controversial example would be the Rhodes  Scholarship that began sending postgraduates to  

Oxford college back in 1902. The scholarship was  founded after the death of Cecil John Rhodes,  

who created the Rhodes Trust with his 1899 will.  

The scholarship was established to  strengthen the internal unity of the  

then British Empire and foster diplomatic  ties between Great Britain and America. 

How can you make generational wealth? And how long  will it take? The most important thing to remember  

about generational wealth is that it can not be  built in a single generation, (outside of a select  

few rare occurrences). You may not have how much  money, but it's possible to create generational  

wealth, as it is merely that act of passing on  some of your generation's windfall to the next.  

While most people try to do this in their  wills, giving money to their inheritors,  

this money tends to end within a single  generation. Real generational wealth will go from  

the first generation of inheritors to the second,  then the third, and so on. The only way to ensure  

a long line of inheritors, generational wealth  has to be a "gown" and not only be distributed. 

The key to growing generational wealth lies  in long-term investing. Generational wealth  

is built upon the idea of slow and steady win  the race. Once a family has a significant amount  

of assets built up, if they want to ensure that  the assets be preserved for future generations,  

they will focus on lower risked  investments for most of their assets.  

These investments are usually split between long  term financial investments and physical assets.  

Unlike financial assets like stocks, bonds,  and loans, physical assets tend to be very  

stable in the long term. These tangible assets  can be range in value from a couple of bucks  

to millions of dollars. The purchase of land,  commercial real estate, or mineral rites can be  

significant long-term investments for a family  to grow their wealth. Though the acquisition  

of those assets will cost a family a substantial  amount of capital, other forms of physical assets  

cost less. A family can purchase gold bullion or  other precious metals. A family may invest in less  

tangible physical assets such as collectables, for  example, fine art. Or a collection of rare books.  

These are assets that may appreciate in value in  the long run, but they will not diminish in value. 

One of the tools used not only by families that  want to create generational wealth but also by  

individuals, is the trust fund. A trust fund's  most basic operation relies upon the concept of  

compound interest and wise long-term investment.  Compound interest is a more advanced version of  

basic interest. Basic interest earns a set amount  of money, based upon the principal investments,  

over a period that the investment remains in  place. Compound interest grows the amount of  

money earned during that same period based upon  the principal investment as wells as the previous  

interest payments. This means that compound  interest has the potential to grow nearly  

exponentially. Another tool that trust funds  use is the acquisition of bonds as they will  

pay out interest payments in the years before  they become mature. As bond tends to be both  

long term and the low risk they are popular with  trust funds that want to invest conservatively. 

Outside of a direct trust fund, generational  wealth can be built upon a family-owned company  

or family-owned property. In these cases, as  new members of the family are born, they are  

given shares in the family-owned business. Unlike  other types of stocks, these shares would come  

with strict conditions that once the shareholder  dies, the shares would then revert to the family.  

This cycle can continue until  the family loses the business. 

What are some of the benefits of having  generational wealth? Why is generational  

wealth worth the hard work and sacrifice? One  of the benefits of a family having generational  

wealth is that it allows for the family  members to have a better starting position  

than the previous generation. While they say that  wealth cannot buy happiness, it can allow for a  

more excellent opportunity. To some, it seems  like this is not fair, but this view ignores  

the sacrifice of the previous generations  that made this generational wealth possible. 

Many families that have generational wealth  will setup individual trust funds for the  

members of the family. This will take the  burden off the younger generation that will  

allow them to follow their dreams instead of  having to work a 9-5 grind. This has allowed  

for several "Trust fund babies" to set  up charities and general philanthropies  

that they usually would not be able to set up. As stated, before one of the most used benefits  

of generational wealth is the disbursement of  scholarships. This form of generational wealth is  

one that many college students not only used but  rely upon to have their college dreams become a  

reality. Many state-sponsored scholarships started  just like the Rhodes Scholarship, as a private  

endowment meant to allow a more significant  number of potential college students to have  

the necessary funds to enrol. As time went on and  college became more and more standard many states  

began to supplement the initial endowment with  funds that were generated through a state lottery. 

Like the scholarship, there is also a grant. A  grant is a form of generational wealth that was  

endowed to solve a problem. There are as many  grants out there as there are problems. Grants  

allow for researchers to have access to funds  to resolve or make headway into that problem.  

There is even a grant called the McArthur  Grant that awards people of a certain  

intelligence level for doing whatever they want. What are some of the potential dangers to your  

newly built generational wealth? Greed is the  number one potential danger to any family's  

generational wealth. Keeping money and saving  it requires all members of a family to sacrifice  

a little so future generations can have some  wealth as well. One of the biggest threats to any  

family's fortune is the greed of an individual or  a cabal of family members. For most people being  

able to live a good life with minimum work is  excellent, but there are some that once they have  

a taste of something, they want more and more. It  is these people that can destroy wealth that was  

meant for entire families. This happens in several  ways. The simplest is that they steal the money.  

They want to hoard all of the fortunes for  themselves by any means necessary. Though  

this sounds cliché, there have been cases where  members of affluent families have killed to secure  

a more significant portion of the family fortune. Another threat to a family's generational wealth  

comes in the form of stupid decisions and bad  investments. A country won by a warrior father,  

can be lost by an egotistic son. This is probably  the best analogy concerning generational wealth.  

Unless a family has a continuous series of a  competent wealth manager, there is a possibility  

that the family can lose all their wealth. There  is a troupe - cliché about the spoiled brats that  

were born with a silver spoon in their mouth that  eventually ruin the family when they take charge.  

While some philanthropists come from wealthy  families and do a lot of good, there exist their  

opposites. The people that incorrectly believe  just because they come from an affluent family,  

they are better than everyone else. The  same way that they look down on others,  

they think that they are smarter and better than  everyone else. It is this arrogance that will  

lead them to squander the family fortune.  As they will not listen to the advice of  

professionals that they believe are under them. When people think about Ponzi schemes and their  

victims, they tend to think about the millionaires  and billionaires that got greedy. The groups  

that they forget about are the many trust funds  that are tricked out of vast amounts of money.  

Trust fund managers act a lot like pension  managers meaning that they have a fiduciary  

responsibility for their investors. This means  that in some cases, even against the manager's  

better judgment, they must invest a little into  a Ponzi scheme because the investment is made  

known to them. If they do not, then they can  be liable under "Faithless servant" statues. 

The exponential growth of the family can lead  to decreases inheritances as the family fortune  

shrinks. Remember the Rothschild family from  earlier, well even though the exact size of  

the modern fortune is unknown. The growth of the  family over the years has produced a significant  

number of inheritors that most likely put a  strain on the family fortune. No matter how  

big an estate is, there is only a set amount  of money and assets that can be divided up  

and passed around before there is nothing left.  The critical thing about generational wealth  

is that it is there not for the present generation  but the future generation. This means that no  

matter how many family members there are, some  money has to be invested in the next generation. 

If you want future generations of your family to  have a better life, than hard work and sacrifice  

with a lot of long-term planning is required. By  investing your fortune into low-risk long term  

investments, you can be able to make generational  wealth for your family. With this family fortune,  

they will be able to do the things that  they want at an earlier age. Though there  

are potential pitfalls, with careful planning, a  family fortune can last for generations to come. 

Well, that’s it for the video, I hope  enjoyed it and gained some value.  

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have a great day! and I’ll  see you guys in the next one.