The personal finance radio host Dave Ramsey often talks about creating ‘generational wealth’ as the final step in his Total Money Makeover. He encourages people to think about how they can fundamentally “change their family tree” by building an uber portfolio that allows them to pass money on to their kids and even grandkids.
I like to listen to Dave Ramsey and think he generally gives good advice. That said, I’m uncertain how committed I should be to this goal of generational wealth.
We’ve done our best to get our son off to a great start by funding his college costs, having him live at home rent-free during the pandemic, and giving him my wife’s old car. He has a great-paying job, savings in the bank, a Roth IRA, and a brokerage acount he started when he was 19. He is very responsible with his money and is building a good career in software development.
I don’t really think there is anything we need to do to further help him and would worry a bit if we were paying his bills beyond this point. It seems that he is more than ready to fly – he has in fact been financially flying on his own for some time.
We have some friends whose kids are a few years older than our son that have decided their kids are on their own. With good jobs and bright prospects, they have made the call that they don’t need to hold any wealth back to help their kids any more. Instead, they are investing a big chunk of their $$$ in a dazzling, new vacation home that will upgrade their lifestyle instead (will also be a great vacation spot for the extended family).
I noticed too that Bill & Melinda Gates – who are splitting their $130B estate – have previously ‘only’ pledged to pass on $10 million to each of their 3 adult children. I guess that amount of $ – and the ‘Gates’ name – is surely enough to guarantee them security for their whole lives and probably their kids, too. Still, they are not locking up much of their wealth in their family’s future the way the Vanderbilts and Rockefellers did a century ago.
We’re young enough that there is a lot of uncertainty as to how much our estate will be worth at our passing. The strong market over the last 5 years has put us way ahead of our FIRE (financially independent & retired early) plan, so I’m guessing we have more than we need should even a significant economic downturn or severe inflation come our way.
We’re certainly not spending at a rate that would use up our wealth in our baseline plan, so I’ve always figured we’d pass on “whatever is left” to our son. Perhaps before that time we’ll be able to help him with his first house or put some aside for his kids’ college. At the same time, I’m starting to think we might want to invest in some luxuries for ourselves – like a Florida place – with our current financial cushion.
How are you thinking about generational wealth?
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