We hit a major financial milestone this year that has got me thinking about generational wealth. We’re officially <half> millionaires! As we’ve been approaching this goal, I’ve been thinking more about generational wealth and our kids. More so about how to pass this privilege and responsibility of having money down to them. I know some people might think that it’s impossible to amass a substantial amount of money yet alone pass it on to the next generation.
However, in this post, I want to show you that:
1. Building a large amount of wealth in one generation is possible, and
2. How that wealth can grow incredibly fast for the next generation.
Building Wealth In One Generation
I’m a bit of a nerd when it comes to investing so I’ll play around with investing calculators a lot just to get an idea of where we’ll be at retirement age. Based on what we currently have invested and what we currently invest per month, at age 59 we should have saved in the neighborhood of $5 million. This is awesome. Kim and I are going to be just fine in retirement.
But we’re doing this for more than just ourselves. We have another goal of building wealth for the generations to come.
Kim and I are already doing the hardest part, which is building wealth from zero. But now that we have the ball rolling, we plan to keep going.
Let’s walk it through.
Before I get to the numbers I want to talk about an old money rule called ‘the rule of 72’. So, you take what you think your annual rate of return on an investment will be and divide it into 72. The answer gives you the number of years it will take for your money to double. For example, the stock market has made 10% a year over the past 90 years. 72 divided by 10 is 7.2. So, about every 7.2 years, your money will double.
Building Generational Wealth
At age 59, our kids will be in their late 20s. Based on the rule of 72, I know that our money will double every 7 years roughly. See the chart below.
Our Age ……………… Our Investments
59 …………………………. $5million
66 ………………………… $10million
73 ………………………… $20million
80 ………………………… $40 million
87 ………………………… $80 million
As you can see, once that first generation (in this case, us) gets things going, growing the money is incredibly easy. By the time Kim and I both pass away, there will be plenty of funds. Even if I’m half wrong, there will be a substantial amount of money left.
The Scary Part Of Generational Wealth
Honestly, building wealth isn’t even the part that scares me the most anymore. Kim and I have developed the habits to get to wealth. What scares me the most is passing down $80 million to our kids. Without the proper mindset, that kind of money has the power to ruin someone’s life. Such a big part of our mindset has come from our struggles and failures. We developed our “why” due to this.
So, in turn, this brought up a lot of questions for us.
- How do we help our kids develop their own “why”?
- How do we help them to handle this privilege responsibly?
- How do we ensure that they don’t become douche bags just because they are going to get a little money?
These questions scare the hell out of me.
Final Thoughts
It’s exciting to be able to even think about the possibility of generational wealth, let alone be in the position to do so. However, the questions above scare the hell out of me. In the next post, I’m going to talk about some of the conversations Kim and I have had about these terrifying questions and how we plan to handle it.
Kim’s Thoughts: I’m thrilled that we have the opportunity, the means, and the mindset to be able to take care of ourselves in retirement. However, with that comes responsibility on our part in regards to our kids as well. Those same questions Omar posed are the same questions and thoughts that I’ve had myself, especially since they won’t know of their parents having any debt. We definitely have to figure out something for them because otherwise, we’d be setting them up for failure regardless of how much money we leave behind once we pass away.
We’ve got our own thoughts on how to handle this, but we definitely want to hear your thoughts on generational wealth and your ideas on how you plan to pass wealth down to your kids.
Feature Image: Unsplash
First, congratulations! Y’all are amazing and you know it!
Second, I think the boys have great parents and doubt they will become douche bags due to inheritance, but if they do, I think y’all can honestly say it wasn’t because of anything y’all did. Lol!
But this is a great conversation. I know majority of Americans have the thought of “what debt will I leave my children?” Instead of “will my children be good people and have their own why for wealth if we have wealth to pass down to them?”
I would like to second Jessica’s CONGRATULATIONS to you both as well for continuing to strive toward your financial goals and starting a solid foundation for your family to build upon, as well as for the world to build upon when you guys share your journey (testimony) with us. I am truly grateful that you both have taken the time to start this blog and also conversing with us (my family, when we meet up) on those elephant in the room topics. Many blessings to you both and your family.
Switching gears lol:
My husband and I are also striving toward setting up generational wealth for our family, and trying to get our extended family on board about building generational wealth for their families also. I do also wonder if our children will become douche bags too and not continue the wealth, but then I realized if they do, then it will not be because of us(the parents) not teaching them the proper way about life and finances. Our goal is to teach them about finances early and help build a solid foundation for them to build upon as well. I have hope that the school systems will also teach finances as well. The earlier the better, right! It seems as though the culture (the world) teaches us “look out for yourself” or “get yours and I’ll get mine” type of situation. I would like for us to teach from a place of love and community, each one teach one for the betterment of all mankind.
Thank you both again for taking the opportunity to be the change that you want to see in the world and I am following suit.
Love this so much. Working on my half millionaire status but definitely thinking of the next generation!
Just keep in mind that your kids will probably be on Social Security before they ever inherit any of your money so it is unlikely to be of much significance to them. Unless they are losers they should be multimillionaires on their own by then, remember several million in that distant time won’t be worth all that much. In any event your 60 plus year old kids will have already lived most of their life so that money will not have had a chance to damage them.