What Is Generational Wealth—and How Do You Create It?

It often feels like a huge enough struggle to manage your finances to cover yourself and your kids through their college years—but many parents are also focused on ways to ensure that their kids can benefit from all their hard work after they're gone, a concept known as generational wealth. "It's the assets that get passed down from one generation of family to the next and facilitates opportunities for future generations—like graduating from school without the burden of student loan debt, or inheriting property, which still serves as a cornerstone of wealth for many Americans," says Money Confidential host Stefanie O'Connell Rodriguez.

That's the big concern on the mind of this week's guest, Viola (not her real name), a 39-year-old woman who recently was able to purchase a home in the Atlanta suburbs, thanks to a life insurance policy her mother had taken out before her death.

Viola is hoping to make sure that she is able to give the family home to her son down the line. "I'm probably a little too hard on myself trying to leave that legacy for him," Viola says. "And I'm just very happy that I was able to give this gift because it's not only a gift to me from my parents; it's a gift from me to my son." Her efforts to secure this for her son have led her to critique her financial choices, and look for more ways to optimize her spending for her son's future.

But this week's expert, Kiersten Saunders of richandregular.com, says that she shouldn't be so hard on herself about her financial decisions. "It's not about figuring out how to make this money live on," Saunders says. "That money is meant to be a steward to your healing. And it sounds like you're doing the right thing. It's OK to just stop it right there."

Saunders suggests looking at your spending holistically, at both what it provides for you and for your children in the future, and in what lessons you teach your child with how you choose to prioritize your spending. "I think one of the things that helps me when I'm at a decision crossroads, especially when it comes to my child, is to ask myself, what do I hope my child learns from seeing me do this thing?" she says. "Let's say I've got $9,000, and I can decide to upgrade the bathrooms or I can decide to maximize some tax advantaged accounts. The question that I ask myself is, what do I hope my child learns as he's watching me do these things? And in one of those answers, I typically get clarity."

Saunders also recommends looking beyond just the single asset. "I just wouldn't put all of my eggs in that one particular asset class and basket as, like, the thing that is going to guarantee generational wealth for your child," she says. "There's a lot of different means and mechanisms for you to pass on wealth in this century."

Get more strategies for enhancing your financial legacy in this week's episode of Money Confidential: "What's the best way to build generational wealth for my family?" available on Apple podcasts, Amazon, Spotify, PlayerFM, Stitcher, and wherever you listen to your favorite podcasts.

Read the full transcript.