Summing up our month on financial literacy, today's focus is going to center around the importance of protecting our assets in order to establish and build generational wealth. There are three things we will touch on before diving into building generational wealth: a will, a trust, and universal life insurance.
A will is a legal document that describes how your assets are to be handled after you go home to glory. It is encouraged for everyone over the age of 18 to have a will in place to avoid any confusion of where your property is to be divided. Wills are state-specific meaning if you relocate to another state you need to write a new one. Married couples can get a "mirror will" which are two identical wills signed individually by each spouse. If you currently do not have a will, do so now at Dave Ramsey Recommended Online Will Maker - Ramsey.
A trust, also called a trust fund or trust account, is a legal arrangement where the trustor grants the trustee the right to manage assets for the benefit of a third party, the beneficiary. This arrangement ensures the trustor's assets are protected and distributed according to their wishes. Trusts also help in transferring property ownership and avoiding probate.
Universal life insurance is a type of permanent life insurance that offers lengthy coverage and builds cash value over time. You pay a monthly premium and upon death your beneficiaries receive a payout. You also have the opportunity take out loans while you’re still alive as these policies come with a guaranteed minimum interest rate that helps to build your policy's cash value.
Generational wealth is defined as financial assets passed from one generation to the next which includes cash, stocks, bonds, cryptocurrency, real estate, family businesses... anything that has financial value. More importantly is the mindset and character of the generation who will inherit what is being passed down so that the wealth will last. Dave Ramsy breaks down 4 points in building generational wealth:
Create a Firm Financial Foundation
-get out of debt (except the house mortgage) and save up an emergency fund (3-6 months of expenses before investing)
Invest 15% of Your Income for Retirement
-work with an investment professional to build your portfolio
Pay off Your House Early
-make extra mortgage payments
Teach Your Children About Money
-impart knowledge, wisdom, and skills when it comes to finances
It's never too late to start teaching the next generation the importance of building and managing wealth. We are called to manage wealth for God's glory, not love the wealth but steward it with wisdom. A lack of knowledge leads to ruin. There are numerous resources out that will help you reach your financial literacy goal, you just need to take the first step. Proverbs 13:22 says, "A good man leaves an inheritance to his children's children." What are you leaving behind?
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