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.
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