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What is generational wealth and how do you build it?

As economists continue to predict the coming of a recession, many are left wondering what they can do to secure and potentially grow their wallets amid the chaos. For some, however, a recession may just be the perfect time to develop generational wealth that could last for years come.

Generational wealth refers to the financial assets that are passed down from one generation to the next. That could be in the form of property, investments, cash money, or other things of monetary value.

This kind of wealth can help ensure that one’s future children or relatives will have some kind of financial support.

However, building wealth isn’t and hasn’t been easy for everyone.

Because of systemic barriers – including racial discrimination in housing, employment and banking – the typical white family has eight times the wealth of the typical Black family and five times the wealth of the typical Hispanic family, according to the Federal Reserve.


Having expendable wealth or generational wealth to build upon is a privilege, according to Jully-Alma Taveras, personal finance writer and founder of Investing Latina. It can be difficult for people with limited income to even begin taking steps toward accumulating wealth.

Catherine Collinson, CEO and president of the nonprofit financial wellness organization Transamerica Institute, says there are still ways for people to implement wealth-building practices into their routine.

“Living paycheck to paycheck can be daunting, especially now amid skyrocketing inflation and the lingering effects of the pandemic,” said Collinson. “Although it’s much easier said than done, it’s important to stay positive and avoid getting discouraged or overwhelmed – because that can be counter-productive.”

There are different routes that can be taken toward building wealth, and the path won’t look the same for everyone, financial experts say.


This journey can begin with small steps as easy as educating your children and family on financial planning, to steps as big as owning property that is likely to accumulate value.

Educate your children and family on financial literacy

Collinson recommends engaging children in family financial budgeting decisions. For example, she says planning for a vacation should include creating a budget, identifying costs, and making the necessary trade-offs to avoid overspending but maximize the amount of fun.

The same could be said for other family activities such as birthday celebrations, taking care of a pet, or grocery shopping.

Collinson said her own relationship with building wealth was influenced by her grandparents.


“Having lived through the Great Depression, they were adamant about living within one’s means and saving for the future whenever possible,” Collinson said. “They taught me that how you manage your money is just as important, perhaps even more important, than the size of your paycheck when it comes to building wealth.”

Taveras also leaned on the influence her business-owning family members had on her to put her on the right path for proper spending.

“I wanted to kind of represent myself and my family who happen to be business owners and have always been very, in many ways, financially strong,” she said.