What comes to mind when you hear the words generational wealth? Do you think of the Kennedy’s, the Rockefeller’s, or perhaps the Hilton’s? Aren’t these families we’d love to be a part of, yet somehow winning the largest mega million jackpot seems more likely. We think, “I’d wish I had that kind of money, but that kind you are born into.” If you were thinking along these lines, you would be right!
Generational wealth is a system of financial planning that is structured to remain stable and trickle down through several generations, often increasing as it continues to move down (that sounds weird). It begins with the first generation (typically not wealthy) who creates the wealth, which in turn is put into a system (investments) where the wealth builds upon itself, increasing as time goes on also known as compounding interest (whew, that’s a lot to process).
Okay, so you probably weren’t born into this scenario, and your thinking, what does this have to do with me? The reason for understanding the concept of generational wealth is to see that it is designed to purposefully setup future generations. With that I pose, why can’t we treat our financial education similarly? The more we know, the more we can teach, and the more our future will benefit. Of course this sounds simple in theory, but rarely is it implemented. Purpose and commitment are words we often struggle with. Think about it, on average, how many ideas or thoughts requiring an action pop into your head daily? Now think about how many you actually achieved purposefully.
Once upon a time, saving was important. Whether it was, food, money, materials or other resources, mindsets were trained to save for, “just in case”. There was less focus on consuming, and more emphasis on working with what you had. Fast forward to 2012, there is an over indulgence on consuming and a dramatic decline in saving. The desire for instant gratification is perpetuated through advertisements, media, music, and the classic “keeping up with the Joneses”. If we can’t instantly afford it there are options waiting to “assist”, after all we have to have it now, right? Our options range from, the “Buy Now Pay Later” online shopping option, you can even save a whopping 10% if you sign up for a store credit card today (exciting), and last but not the least, there are more than a few financial institutions that can “assist”, also known as, the loan and the credit card. Well aren’t these options convenient.
I once read that the second half of a man’s life is made up of nothing but the habits he has acquired during the first half. With current society standards, I believe we are raising individuals born into what I call the financial generational curse. The concept of having a generational cursed is characterized as, inheriting something negative as a result of the actions or inaction’s in the previous generation. Our lack of financial literacy is producing a generation of individuals who are uniformed of concepts like, credit, credit scores, and interest rates. Banking terms such as, money market savings, CDs (certificate of deposit), and lines of credit, all sound foreign. The financial habits we currently have are crucial to the habits our children and others around us will have. As important as money is in our everyday lives, it is shocking how many people put their financial education on the list of “things to do when I get rich” (oh that word). What we have to understand is, what we do with a little, we will do the same with more. Meaning, if you can’t save in your current financial situation you’re not going to save in a better one. Actions without purpose are pointless; it will always lead to complacency. What has to change to facilitate purpose in actions is our mentality; how we interpret the things we do. Many financial struggles are self-inflicted (not all, but a great deal), and they can only be corrected when we stop being ignorant and put forth effort.
Let’s reflect: Where did you get your earliest thoughts about money, saving and credit? What thoughts do you currently subscribe to? Are they accurate? How do you know? My favorite question is, “does your current financial situation work for you?” I absolutely love this question because, it is the answer many will give, that is the reason we become delusional to our financial happenings. I say this, because I’ve been there before too. It’s interesting how many of the ideas and attitudes we have about finances can come from people who have never built healthy financial lifestyles themselves. We listen to just about anything we read that sounds good (even my article). We as a society have become lazy, and researching things beyond Google and Facebook is out of the question. Many people will accept the beliefs and words of someone without verifying if they even have the right to teach us? Yes, even your parents!
If I conducted a survey on the things people wish their parents talked to them about, the top results would most likely be sex and credit. For some, we can remember a detailed conversation about these matters, for others maybe nothing at all, but for most we can remember some abstract mentions that our parents positioned as a “conversation”. These “conversations” usually sound like a horrible version of a PSA (public service announcement): “don’t have sex until you’re married”, “credit cards are bad”, and “don’t get into debt”. While the intentions of the “don’t” are positive the lack of details embedded into these demands are just pure directions to a dead-end. This concept I like to call the “do as I say and not as I do”, and as we all know and learned, it doesn’t work! While this is not true for every household, it is true of too many.
We heed the lessons or lack thereof our parents instilled in us. Whether right or wrong, it is often not until we have some experience do we verify the reality of those lessons. People always say “they will learn eventually, we all have to make mistakes”, I say no. That very form of thinking has us where we are right now, a country in excessive debt, with a small percentage of people living in financial freedom (please understand I am not talking about having a certain amount of money, I am referring to having whatever amount you have and utilizing it properly so that you can have freedom). We must learn from the life lessons of others. Famous author Rick Warren wrote, “While it is wise to learn from experience it is wiser to learn from experiences of others.” Imagine if we shaped our mentality around this very statement, how may “set backs” could be avoided. Bad habits are educated into us and bad habits can be educated out! Stay tuned to my upcoming article to discuss the steps to breaking the generational curse by understanding the myths that get you there and keep you there.
Anyone can be average- few will be exceptional- you decide.