5 Assets You Own Now That Could Make Your Children Rich
If you want to pass wealth on to your children, you don’t need to be rich now. Many assets that people already own could be used to help your children down the road. And if you don’t have these assets yet, many of them are within reach for ordinary people.
For example, utilizing tax-advantaged accounts like 401(k)s and IRAs can go a long way toward building generational wealth, said Aaron Cirksena, founder and CEO of MDRN Capital.
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And the earlier you can start saving and investing money, the more you can let your investments grow, even if the initial contributions are modest.
“There is a huge difference if you start saving when you are 25 versus 35,” Cirksena said.
But even if you’re past that age, it’s possible to make your children wealthy by making a bigger commitment to saving and investing. You’d be surprised how, say, a $10,000 investment here and there, as opposed to buying a new car every few years, can add up over the decades and set your kids up for success.
“Practice frugality and live within your means to free up funds for saving and investing. Avoid unnecessary debt and prioritize long-term financial stability over short-term gratification,” said Taylor Kovar, founder and CEO at 11 Financial.
Specifically, consider saving and investing to accumulate the following five types of assets or letting them grow if you already own them.
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Real Estate
Real estate can be a great way to pass money on to your children, both now and in the future.
“Owning properties such as a primary residence, rental properties or commercial real estate can appreciate in value over time and provide rental income,” Kovar said.
You might use rental income to pour more money into other assets while letting the value of the property potentially grow.
Investment Accounts
Your investment accounts can also be a great way to build wealth, letting the power of compound interest generate more for your children than you could save on your own.
“Building a diversified investment portfolio comprising stocks, bonds, mutual funds and other financial instruments can generate long-term wealth through capital appreciation and dividends,” Kovar said.
While you might own some assets within traditional brokerage accounts, consider investing within tax-advantaged retirement accounts to potentially pass on even more assets to your kids.
“Accumulating substantial retirement savings through employer-sponsored retirement plans, IRAs and other investment accounts can ensure financial security for future generations,” Kovar said.
A Business
Passing a business onto your children can also be a great way to set them up financially, either by giving them an income-producing asset or possibly giving them something they can later sell for a windfall.
“Starting or investing in a successful business can create significant wealth and be passed down to future generations,” Kovar said.
However, only 23% of Americans who have or plan to have generational wealth discussions with their families said that they’ve discussed family business succession, according to an Edward Jones survey.
If you do own a business, consider speaking with your kids about it so they have a better understanding of its value and how it can continue to grow if they take over.
Life Insurance Policies
Even if you don’t have a lot of money now, life insurance policies can be purchased for a relatively affordable monthly amount, while potentially giving your children a lot of money when you pass away. However, much depends on the specifics of the policy.
Term life insurance is generally much less expensive than permanent life insurance, but it only pays out if you pass away during the policy term. Some wealthy families, however, use permanent life insurance to transfer wealth to future generations based on tax considerations.
“Life Insurance can be a very efficient way to pass assets to the next generation while minimizing any tax implication, as typically, life insurance benefits are considered a tax-free transfer,” Cirksena said.
Collectibles
Lastly, consider collectibles as a way to pass wealth on to your kids, Cirskena said.
Collectibles can include a wide range of assets, such as art, action figures, trading cards and even wine. Maybe you already have some collectibles that you can pass on to your children or you could consider diversifying your assets by buying some that you can one day give to your kids.
In general, having more than one type of asset, such as collectibles, along with real estate, stocks, bonds, etc., can be a helpful way to build long-term, generational wealth.
“Spread your investments across different asset classes and industries to mitigate risk and maximize potential returns. Diversification can help protect against market volatility and economic downturns,” Kovar said.
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This article originally appeared on GOBankingRates.com: 5 Assets You Own Now That Could Make Your Children Rich
