What Is Intergenerational Wealth Planning?
Most parents strive to leave a financial legacy for their children. No matter how much money you have, it’s important to do what you can to help your children thrive as they grow up and have families of their own.
This is known as intergenerational wealth planning. And while giving your money to your family when you no longer need it may sound simple, there can be a lot to navigate.
At Bloom, we’re all about helping families and communities plan and save for the future. So here’s our guide to intergenerational wealth planning — saving for future generations of your family.
Why is intergenerational wealth planning important?
Wealth planning involves taking steps to ensure your family benefits from as much of your wealth as possible. Not only that, it also means making sure they have more opportunities to create wealth of their own. It usually involves:
- Tax efficiency
- Finding the best time(s) to pass wealth on
- Maintaining your living standards
- Protecting wealth now and in the future
Traditionally, intergenerational wealth planning has been seen as making preparations for when you die. But a more modern take encourages people to act while they’re still here, so they can see their families enjoy the money they’ve made.
And it’s not just your family who can benefit from intergenerational wealth planning. It’s an investment in your entire community. People across your community can prosper when multiple families focus on helping their children — and their children’s children — thrive financially.
The complexities of modern wealth management
In today’s modern, multicultural, multigenerational society, wealth planning is more complex than it used to be. Attitudes to money and investments vary between cultures. Some people start a family more than once, and want to ensure all their loved ones are catered for.
As a result, more people are starting to distribute their wealth throughout their lifetime, and taking measures to enhance their wealth while they’re still here. So what can you do to build intergenerational wealth for your family and community?
What can you do to build intergenerational wealth?
Speak to a financial planner
Get trustworthy financial advice from a reputable financial planner. They can review your financial situation and suggest ways to build generational wealth in line with your beliefs and traditions. For example, they can find Sharia-compliant investment opportunities, help you save on inheritance tax, or seek out ethical banks and saving schemes.
They can also help you make a plan for giving away wealth in the near future, as well as after you pass on. That means you can see future generations enjoy your wealth, giving you and your family greater fulfilment.
The earlier you start saving, the more money you’ll be able to accumulate and pass on to future generations. Even if you’ve just started working, you should consider setting up and paying into a pension fund (in the UK, your employer is legally required to do this for you in most cases).
Joining a rotating savings club is an informal way to save money alongside others in your community. Also known as committees, pardna schemes, or hagbad, these schemes are popular with many communities around the UK. You can join or start one at any age, as long as you have a steady income. Find out how to set up your own savings club.
Speak to your family and/or beneficiaries
Money is a taboo topic for many people — but it can be really helpful to speak to your children and/or grandchildren about their inheritance. You can find out more about their financial ambitions, and help them plan for the future of their children, too.
This is especially important for anyone who has multiple families (for example, a second spouse with children or stepchildren). This can help you set and manage expectations, preventing any unexpected surprises or conflict when your will is executed.
Make ethical investments
Creating intergenerational wealth isn’t just about money in the bank. Your assets will also eventually pass down to your children. So it’s important to diversify your investments in line with your values and beliefs.
- Buying a house
- Starting a business
- Paying for education
- Funds that don’t invest in alcohol, tobacco, oil, or other controversial commodities.
Learn how to plan and build generational wealth
A rotating savings club is a great way to start saving for future generations of your family. Learn how ROSCAs can help build generational wealth.
Intergenerational wealth planning is something you can start to think about even before you become a parent. If you’re planning to start a family at any time in the future, find out more about having a baby in the UK.