Most of us started developing financial habits long before we were ever aware of it. Whether it was seeing family members argue over finances or being rewarded with a cash allowance for chores, our earliest life experiences served as the foundation for how we would relate to money. As circumstances have changed throughout our lives we now have the ability to influence how those who are coming up behind us will handle their own finances. However, with this responsibility comes the complex task of teaching a social-media driven society the need for building wealth early on in life. Even more so with the virtual nature of this current generation, it is critical that we instill the following principles about generational wealth:
Principle #1. Wealth is not just monetary
Sometimes due to our own implicit biases, we can make the mistake of only associating wealth with money. While money certainly gives us more options in life, it should not be viewed as the end-all or be-all when it comes to wealth. By doing so it severely limits our ability to maximize other intangible assets such as our time, talents, relationships, and faith. Furthermore, all of these things can potentially be used to generate more financial wealth if utilized properly. Money itself should not be prioritized over our time because we can never successfully get back or repay time. This mindset is critically important in teaching generational wealth principles to a new generation. For without a clear understanding of this, wealth can
actually end up looking more like poverty in disguise.
Principle # 2. Assets & liabilities must become our focus
While society tends to place the most emphasis on how much money we make, income generally has very little correlation to actual wealth. The reason why is because so many people fail to understand the fundamental difference between assets and liabilities. The accumulation of assets, particularly those that are income-producing, is without a doubt the engine that drives financial wealth. Additionally, the reduction of liabilities, especially high
interest debt, is what helps us sustain wealth by freeing up funds to invest in additional assets. According to nielsen.com , it is estimated that black americans currently account for nearly $1.2 trillion dollars in spending each year. Therefore, it is now more urgent than ever that we teach
the next generation not to focus solely on their income or their spending. Instead we must make sure they are understand the principle of investing in assets that will appreciate over time.
Principle # 3. Entrepreneurship is just as important as education
It is often estimated that today’s average millionaire has seven different sources of income. While this statistic may be somewhat difficult to grasp, it underscores the fact that education alone does not ensure wealth. What education does do is significantly increase your earning potential in one specialized job field throughout the duration of your life. Entrepreneurship on the other hand is a more critical means of generating passive income from multiple sources instead of one sole job function. And while there are other equally important ways to generate passive income such as investing in real estate and financial markets, entrepreneurship will always be critical to the survival of our community. Without entrepreneurship, financial freedom for most african-americans will remain far out of reach.
Finally, in teaching generational wealth it is important to remember that this generation’s experiences will likely be much different than your own. Particularly when it comes to children, the key is to be mindful that they may not fully relate to money in the same way you do. For example, they probably will never have the need to visit a bank branch, balance a checkbook, or even write a personal check. Just a few generations ago these activities were not only critical to learning about money but also essential to financial survival. Now between uber, mobile banking, and budgeting apps, we have almost eliminated the need to operate our daily lives through cash. What technology hasn’t replaced however is the need to teach future generations that wealth takes time, effort, and discipline to build successfully. And that won’t happen simply through a swipe or click.