Updated: Apr 14
Why Money is needed in Human Society ?
Often times, people say that they can live without money. They define money as just one of the tools that enhances peoples living environment. However, in real life, money is a very important matter in peoples lives.
Although the people in history might have lived through the exchange of goods or Barter System and not relying to the value of money itself. Today's modern society could not function without money. Money plays a huge role in the society in variety of ways such as meeting Basic Needs, Wants , Shelter , Taking Care of Education and Health Care Needs etc.
Money allows the people to maintain harmonous relations in Society as Human Relations are economical in nature . Money helps people to achieve a better quality of Life and Living Standards , Peaceful Life , Better Education, larger chances of Business Success etc
Money is important because it can help eliminate material wants and suffering – by enabling you to take control of your life, care for your loved ones, and give back to your community.
One Way or Other , Money plays a Central Role in Modern Society and One cannot imagine Modern Life Without Money.
Besides this, Financial Independence is key to Peaceful and Purposeful Life.
What is Wealth Creation ?
Wealth creation is the process of Saving and Investing in different asset classes where the investments will help in fulfilling key needs. These investments should also be self-contained that can generate a stable source of income, helping one to fulfil their needs and aspirations.
The wealth creation process will be most effective if started early. Starting investments during the early stages of life will give a head start for achieving goals. It also helps in generating higher growth in the long term. This is due to the power of compounding. Power of compounding is a concept that will help in building a considerable corpus in the future. The concept of compounding revolves around reinvesting the returns back into the fund to earn higher growth. Therefore, the longer one stays invested, the higher will be the gain in Wealth.
Lets Deep Dive into Legacy Wealth Creation...!!
For instance, you might be focused on getting out of debt, saving money, or pursuing other financial goals. It may be that creating generational wealth is not on your immediate priority list while you tackle your current finances. But with that being said, you can still build it into your long-term financial goals.
Not quite sure what Legacy or Generational wealth means exactly? Lets discuss exactly what it is and how to build it for your family.
I. What is Legacy or Generational Wealth?
Generational wealth is wealth ( Cash, Stocks, Real Estate, precious metals such as Gold and Silver , Enterprises , Companies , Artifacts and Antique Items etc.) that is passed down through a family for generations. It creates a distinct financial advantage to those that inherit it. However, it tends to dwindle from generation to generation as family members deplete the wealth without replacing or increasing it.
Statistics show that after the second generation, 70% of wealth is depleted, and after the third generation, that increases to 90%. So the lesson here is that not only should you pass down assets, you should also pass down the knowledge and habits that preserve those assets from generation to generation.
Pic : In the Psychology of Money, Morgan Housel teaches you how to have a better relationship with money and to make smarter financial decisions. Instead of pretending that humans are ROI-optimizing machines, he shows you how your psychology can work for and against you.
If you are able to leave something behind for your children or grandchildren, then you are contributing to the growth of legacy wealth in your family and If every Generation adds to that Wealth One Way or Other and It keeps on Increasing day by day and giving distinct advantage to that Family in Society.
Of course, you may leave many things such as good memories and healthy genetics behind for your family. However, We are specifically referring to the financial resources that you are able to leave behind.
This wealth can come in many forms such as real estate assets, stock market investments, Precious Metals , Artifacts and Antique Items or a financial education to carry forward into the future.
Why is Legacy Wealth important?
If you are starting from scratch with your finances or starting out with a large debt burden, then you should realize the importance of generational wealth.
What if your parents had the ability to fund your college education? This single action could have a tremendous effect on your financial future. Instead of playing catch up to pay down your student loan debt, you could be saving for your first home or your future retirement.
As you continue your personal finance journey, you have likely discovered that it is not always easy to recover from your financial mistakes. What if your parents had been able to offer solid financial guidance as you stumbled your way through ? It could have prevented spending beyond your means or started you on a budgeting habit much sooner.
The more you think about your own financial life, the more you realize how important legacy wealth can be. If you have kids or plan to have kids, then you may start to think about how their financial futures will play out. Imagine how differently things could turn out if you take the time to educate them on personal finance and set up vehicles to add security to their financial future now.
II. How to create and build Legacy Wealth ?
The concept of building Legacy Wealth is easy.
You simply have to acquire assets or save cash that you don’t intend to spend in retirement. Then you pass those assets along to your children when you pass away.
This sounds easy in concept but can be difficult to put into practice. If you are struggling to build your savings, then saving for the next generation can sound overwhelming. And that is completely understandable!
It is critically important to nail down your own retirement savings plan and other financial goals before you start to save for generational wealth. Once you have a handle on your current finances to fund your golden years, then it is time to start saving beyond that.
How should you start to save for generational wealth ?
Here are some of the best ways to start preparing to leave a legacy of wealth behind for your children and grandchildren.
1. Invest in the stock market
The stock market can be a great way to build wealth over the long-term. If you are aiming to build generational wealth, then it is a great option because it has the potential to continue growing for decades.
Investing in the stock market might sound scary if you’ve never tried it. However, it is an important way to build wealth in your lifetime and beyond.
As a stock market beginner, the best place to start is with low-cost index funds. These funds can offer low fees and long-term growth.
You can consider in Investing in Mutual Funds such as Multicap, Midcap and Bluechip Funds etc.
Before investing in Stocks or Mutual Funds, basic research is very important as to how to buy and sell Stocks and Role of Brokerage Firms etc are also critical.
If you are looking for Low Risk and Moderate Returns on Investments, You can consider Mutual Fund Investments.
2. Invest in real estate
Real estate is another major way to build wealth for the long-term. With the potential for steady cash flows in addition to increasing values over time, real estate can be a reliable path to wealth.
The idea of building a real estate empire can be intimidating. But it doesn’t have to be ! You may have already waded into the world of real estate through the purchase of your first home. If you continue to buy properties one at a time throughout your life, then you might be surprised at how quickly your real estate portfolio can grow.
Consider this as an option for building wealth for your kids.
3. Build a business to pass down
Family businesses have the potential for great success. More than 30% of family-owned businesses transition to the second generation. Imagine being able to hand over the keys of a successful business to your children.
Although not all family businesses make it to the second generation, it is possible that yours can. If your interests and abilities align with your children’s, then it is very possible they will want to take over the business you build.
For a great chance of a successful transition, you should include your child in the business from a young age. They need to know how the business operates and how to successfully continue in this business.
Don’t expect them to take over if they show no interest in the business you’ve built. If they are unable or unwilling to take over the operations, then you could consider selling the business to fund generational wealth in another form.
4. Take advantage of life insurance
Life insurance provides the opportunity to protect your family in the event of your untimely death. Without your income, your children might be forced into less than ideal financial circumstances.
If you make the effort to invest in life insurance now, then it could prevent financial tragedy for your children. Plus, they will already have enough to cope with if they lose you.
Particularly, Term Policies in Life insurance can be considered as they will cover only Life of the Main Earning Member / Family Head in the Family and In case of Untimely Death or Any Eventuality, you can use this financial tool to safeguard your family’s financial future.
5. Invest in your child’s education
In many cases, education can provide a way for your children to support themselves. With a college Degree or Masters Degrees or Doctorates , many frequently have the opportunity to pursue high paying jobs that can help them navigate their own finances.
Anyone with better education will always have edge in the Job Market. Although other things in life can come and go, no one can take away your education. If you have the ability to help your children make it through college without any debt, then you are helping to set them up for a brighter financial future than many of their peers.
In 2016, the average student loan debt for college graduates was $37,172 ( USA ) . It is possible that the number will climb even higher in the future. Imagine the amount of financial pressure you will be able to lift from your children’s shoulders with the ability to pay for their education.
6. Teach your children about Personal Finances
It is estimated that 70% of families lose their wealth in the second generation. And 90% lose it in the third !
With statistics like that, it can seem pointless to save for a legacy of wealth. However, in many cases, this loss of generational wealth can be prevented through financial education. After all, it is easy to lose generational wealth if your kids have no personal finance knowledge.
That would be like asking your child to maintain a classic antique car after you pass away without teaching them any mechanical skills. It is likely that the car would eventually break down.
In a similar way, if you teach your kids nothing about personal finance, then it is likely the wealth you leave for them will dwindle throughout their lifetime.
Since you are interested in passing on family wealth, then you likely have a fairly good understanding of personal finance. Make it a priority to pass this knowledge down to your kids. This knowledge will be the best way to build and protect legacy wealth.
There are many ways to broach the topic of money with your kids. You can buy children’s books about money, teach them through games, or show them by allowing them to listen as you talk through financial decisions. You can even help them to set up their own bank accounts from a young age to instill the importance of saving for the future.
7.A Brief Summary on Automatic Millionnaire by David Bach
Many of the world’s greatest investors have only one advantage over us normal folks: they were exposed to investing very early in their lives and took an interest in it. Warren Buffett bought his first stock, Cities Service, at eleven years old. Ray Dalio bought Northeast Airlines at twelve. Something similar happened to David Bach.
When he was just seven years old, his grandma took him to McDonald’s. Once they sat down and started eating, she told him there are three types of people in the world: those who eat at McDonald’s, those who work at McDonald’s, and those who invest in McDonald’s. Then, she helped him buy his first share of McDonald’s stock. What David learned was that, clearly, being an investor was the best way to succeed in life.
What a powerful story! And what an investor David became. Before eventually starting his own financial consultancy, he worked at Morgan Stanley as a vice president. As of today, he’s published twelve books, nine of them NYT bestsellers, with over seven million copies sold. The Automatic Millionaire is his most practical template for simple and efficient wealth-building.
Here are 3 lessons to help you achieve millionaire status:
Saving a little every day will go a long way.
Pay yourself first to make sure you take care of your financial future.
Automatic payments allow you to invest in a disciplined manner without being disciplined yourself.
Would you like to set up your finances so that they run towards your goals on auto-pilot? Then let’s dig into what makes an automatic millionaire!
Lesson 1: The Latte Factor is all you need to get rich over time.
As the saying goes, there are a million ways to make a million dollars. And while some might suggest focusing on only a few things, like earning more, killing debt, and investing as much as you can, others make good use of frugality.
For example, I remember Ramit Sethi rebelling against the idea of denying yourself your precious latte in I Will Teach You To Be Rich. David Bach, however, thinks that this latte money is the exact cash that could make you a millionaire.
He calls it the “Latte Factor.” It means that by saving just a little every day, you could retire early and rich. For example, if you put $10 a day – the equivalent of one $3.50 latte and a $7 pack of cigarettes – into a brokerage account that nets 10% a year on average, you’d have $700,000 after 30 years and $2 million after 40.
David has coached many clients and couples throughout the years, but no other family showed him the power of saving a little as clearly as the McIntyres. They established a retirement plan early on and gradually raised their savings from 4% of their income to 15%.
As a result, they accumulated about $2 million worth of assets by their early 50s, despite never earning more than $40,000 per year!
Lesson 2: The first person who deserves your money is yourself.
One way the McIntyres achieved so much with so little is the idea that no one deserved to get a chunk of their income more than themselves. What does that mean? Well, we all have unavoidable expenses. Bills we must pay. Taxes. And so on. But if we give all these other people and businesses our money first, there’s usually not much left!
So, instead of spending however little we have at the end of the month out of frustration, we should invest a fixed cut of our income into our dreams first. As long as you keep it small, there’ll always be enough money left to pay for everything else.
In the US and many other countries, you can even make use of pre-tax retirement accounts, which take money out of your gross income, not the net. With these, you might even have more money to spend after taxes than you’d otherwise have!
Even if these aren’t available, try to set up a system that automatically takes a certain percentage out of each one of your paychecks. David says that if you can manage to save and invest just 10% of your gross income or roughly one hour’s pay every day, you’ll end up just fine!
Lesson 3: Use automated payments for disciplined investing without willpower.
The good thing about each dollar that never shows up in your regular checking account is that you will neither miss it nor spend it. But why stop there? Don’t just auto-direct how much you want to save, but send it straight to the right places. For example, here’s how you could allocate 10% of your income each month:
5% goes towards an emergency fund until you’ve stored away six to 18 months worth of living expenses in cash.
2.5% goes towards paying down any existing debt.
2.5% goes into stocks and other investments.
The beauty of automating all this is that you only need to adjust the system whenever you’ve reached a certain goal. For example, once your emergency fund is complete, you can pay down debts faster, spend 1% on charity, or look into mortgage rates to buy a house.
Humans are creatures of impulse and habit. Whenever something requires discipline, the easiest way to consistently achieve it is to remove ourselves from the equation and eliminate the need for willpower altogether.
If you can do it with your money it just might make you rich.
III. How to pass on Legacy Wealth
After you build the assets, you’ll need to create a plan to pass them along to the next generation. Here’s what you will need to do to ensure a smooth ride for your assets as they transition to the next generation.
1. Create an estate plan
An estate plan is absolutely essential to securing an easy transition of your assets. The larger your estate, the more complicated this plan will become. At any stage, Its recommended to consult an attorney about how to create your estate plan.
The plan will vary widely based on your goals and assets. With the expertise of a legal professional, you can craft a plan that will allow for your assets to move through to your kids with minimal headaches.
2. Write a Will
A Will may be included in your estate plan but it is important to create one even if you don’t have an estate plan. The Will should include your exact wishes. The more specific you can be about your plans for any assets you have accumulated, the better.
Without a Will, it is not uncommon for things to get ugly between surviving family members. Emotions are high because they’ve already lost you. You can prevent a lot of ugliness and financial trauma with clear guidelines in your will.
3. Set up custodial accounts
Custodial accounts are important vehicles for any financial legacy that you hope to build. Custodial accounts are investment accounts that you can control for your children until they are no longer minors. In most states, they receive control of the account at age 18, but in some states, they will have to wait until they are 21.
You can fund these accounts for your children for future financial goals such as paying for college or buying their first home. However, they may have to pay taxes on this money as they withdraw it.
Another option is a 529 plan. It is a tax-advantaged savings account or a suitable One in your Native Country that is tied to paying for your child’s education costs. These plans are state-sponsored ways to efficiently save for your child’s future.
There are pros and cons to each option, but you’ll need to determine which is best for you and your family.
4. Name beneficiaries for your accounts
A simple way to ensure that your accounts pass easily to the next generation is to name them as beneficiaries on your accounts. In most accounts, you can name a beneficiary.
If you were to pass away, the beneficiary would receive the funds with minimal effort. It may only take a few minutes to add your intended beneficiaries to your accounts but it can save countless hours for your family later on.
IV. The bottom line
Building wealth to last for generations is no easy feat, but it is an admiral undertaking. After you have your own financial situation under control, safeguarding your family’s future is the next step.
Take the time to implement a Wealth-Building Strategy that works for your family. Not everyone wants to invest in real estate or build a business, so find something that works for your situation.
Whatever Strategy you choose, make sure to pass down your financial know-how to your children. Armed with the personal finance knowledge you can provide, your kids will already be one step ahead of the game as they make their way into the world.
V. Wealth Management and Strategies to Adopt
1. What Is Wealth Management?
Wealth management is an investment advisory service that combines other financial services to address the needs of affluent clients. Using a consultative process, the advisor gleans information about the client's wants and specific situation, and then tailors a personalized strategy that uses a range of financial products and services.
Often, a holistic approach is taken within wealth management. To meet the complex needs of a client, a broad range of services—such as investment advice, estate planning, accounting, retirement, and tax services—may be provided. While fees structures vary across comprehensive wealth management services, typically, fees are based on a client's assets under management (AUM).
2. Understanding Wealth Management
Wealth management is more than just investment advice: It can encompass all parts of a person's financial life. Instead of attempting to integrate pieces of advice and various products from multiple professionals, High Net Worth Individuals ( HNIs ) may be more likely to benefit from an integrated approach. In this method, a wealth manager coordinates the services needed to manage their clients’ assets, along with creating a strategic plan for their current and future needs—whether it is will and trust services or business succession plans.
Many wealth managers can provide services in any aspect of the financial field, but some choose to specialize in particular areas, such as cross-border wealth management. This may be based on the expertise of a specific wealth manager, or the primary focus of the business within which the wealth manager operates.
In certain instances, a wealth management advisor may have to coordinate input from outside financial experts, as well as the client's own service professionals (for example, an attorney or accountant) to craft the Optimal Strategy to benefit the client.
Some Wealth Managers also provide banking services or advice on philanthropic activities.
3. Wealth Management Strategy
Generally speaking, wealth management offices have a team of experts and professionals available to provide advice across different fields. For instance, consider a client that has $2 million in investable assets—in addition to a trust for their grandchildren—and a partner that has recently passed away. A wealth management office would not only invest these funds in a discretionary account, but provide will and trust services required for tax-minimization and estate planning.
Those wealth management advisors are direct employees of an investment firm may have more knowledge in the area of Investment Strategy, while those who work for a large bank may focus on the management of trusts and available credit options, overall estate planning, or insurance options. In short, expertise may vary across different firms.
VI. Economic History of the Medici Family and How they Influenced Political Landscape of Florence after their Wealth Creation.
Immigrants from the countryside, the Medici family amassed wealth and used it to dramatically rise to power in Florence, Italy. The Medici moved to Florence in the twelfth century from the Mugello, an area in northern Tuscany. They joined the money lending business early and were not particularly wealthy in comparison to established families of the late middle ages. But, they were soon some of the richest bankers in Europe and used their money to influence the financial world, patronize flourishing Renaissance art, and transform the political landscape of Florence.
1. Medici Family Banking Empire
Early modern Florence was an important financial center with many firms specializing in international commerce and banking. The Medici bank became one of the most famous and successful of these institutions, although not the first Florentine bank to amass large amounts of wealth. Early modern Florentine banks were not focused on the needs of local clients, such as accepting deposits and extending loans, although they may have offered these services at their Florentine locations. Instead they chiefly focused on foreign exchange. By establishing branches in major trading centers across Europe, the Medici bank tapped into foreign trade networks and offered exchange and transfer of credit for clients.
The Medici banking success was not immediate. In the early fourteenth century, the Medici were working as local bankers, but it was not until later in the century that Vieri di Cambio opened a bank in Rome to do business for the Catholic Church. In 1397, his successor, Giovanni di Bicci, transferred the headquarters of his own bank to Florence, where it continued to prosper. During the fifteenth century, Cosimo de’Medici turned Bicci’s bank into the largest in Florence.
Pic : Medici Sites in Florence.
In 1466, the Medici bank became involved in the trade of alum, which was essential in the cloth industry of the time. Merchants imported it from the Levant before mines were discovered at Tolfa, north of Rome on the western coast of Italy. The Medici bank was given the papal monopoly over the Tolfa mines. When further sources of alum were discovered on the Italian peninsula, Lorenzo de’ Medici used devious means to suppress these sources of competition, even sending 12,000 soldiers to brutally sack Volterra, a city subject to Florence. In 1476, Sixtus VI shifted the Tolfa alum monopoly to the bank of the rival Pazzi family, but Innocent VIII later restored it to the Medici bank.
Despite its success, the Medici bank began to go downhill in the later fifteenth century due to a combination of outside factors and poor decisions by Medici leaders. There was a diminishing supply of English wool (an important commodity for trade at the time), the Medici traded heavily on equity, and it was common for banks at the time to operate with tenuous cash reserves. By the time Cosimo de’ Medici died in 1464, several branches of the bank were facing financial difficulties and the establishment overall was profiting less. Cosimo’s less-talented successors were unable to stop the nose-dive taken by the bank, possibly because as unofficial rulers of Florence they made decisions that were political rather than financially advantageous.
Pic : Lorenzo_de_Medici_(Michelangelo), Florence
In 1478, the Pazzi family attacked Lorenzo and Giuliano de’ Medici during Sunday mass, successfully killing Giuliano but not Lorenzo. The failure of the plot may have inspired the Medici’s other enemies to take further action to financially harm the bank. By 1494, the bank was virtually bankrupt and Lorenzo’s son, sometimes called “Piero the Unfortunate,” made catastrophic political decisions that led to the Medici’s expulsion from Florence and loss of all their Florentine property.
2. Medici Family’s Political Control of Florence
The Medici sought influential government positions from the beginning of their time in the Florentine Republic, but they gained more complete control of the city after their success in the financial industry. One of the early Medici, Ardingo de’ Medici, served on the illustrious signoria council at the end of the thirteenth century and his family quickly followed suit. Medici were part of the signoria twenty-eight times over the next fifty years. But this was just the beginning of the Medici family’s influence in politics.
From 1492 to 1537, the Medici relationship with Florence was turbulent, as they were banished twice but managed to regain their influence. But the turbulence was followed by the reign of Cosimo I as Grand Duke of Florence beginning in 1537, making Medici control of the city official. The Medici continued ruling as grand dukes until 1737.
3. Patrons of Art and Science
The Medici also used their wealth to finance the unparalleled flourishing of art and culture in Renaissance Florence. Cosimo de’ Medici was the patron of many artists and architects, including Donatello, Luca della Robbia, Filippo Brunelleschi, and Michelozzo di Bartolomeo. He supported Florentine scholars and helped purchase literary and philosophical manuscripts in Latin and Greek. Lorenzo also supported Florentine artists such as Sandro Botticelli, Leonardo da Vinci, Andrea del Verrocchio, and Michelangelo.
Pic : Medici House and David
He gave more attention to building villas, collecting artifacts such as gems, and commissioning statues, while he continued to grow the family’s collection of books and manuscripts. The Medici rulers of the sixteenth and early seventeenth centuries carried on this elaborate patronage with vast architectural and landscaping projects, such as the Uffizi and the Boboli Gardens, and by commissioning theatrical and musical productions. Cosimo II de’ Medici supported the development of early modern science, particularly by his support of Galileo Galilei as Court Mathematician and Philosopher.
One Medici Family can Influence the Landscape of Florence for about 300 Years with the Power and Influence drawn from the Wealth they created.
If anyone visits Florence today, One can feel their Presence All across the City, Such is the Influence they created with their Wealth.
Golden Nuggets :
Wealth Creation is Long Process and One should not Opt for Shortcuts.
A Lot of Hard Work, Sweat, Tears , Patience , Struggle and Involvement must go into Wealth Building Process and That Kind of Wealth only lasts long and remains with Family for Generations ( Universal Law of Karma will always be in force ).
One's Money should be always Hard Earned.
Always start Wealth Creation Process early in order to take Advantage of Compounding Affect.
Always create a Family Trust and Family Constitution so that, Wealth will be always in Right Hands of Your Family Members.
Never involve in any Ponzi Scheme or Pyramid Scheme to make Quick and Easy Money.
If Some One Offers a 20 or 30 % Return on Investment , Please evaluate that Proposal several Times before making Investment decision and If You found too many Loose ends, avoid investing in the same.
Please be aware of Money Traps involving One Year Subscription Free or No Financial Charges for a Stipulated Services, As there is No Free Lunch in this World.
There is a basic formula for building wealth: make more money than you spend, avoid debt, and invest your savings wisely.
The first step is to earn enough money, which is easier if you're doing work you enjoy, are good at, and pays well.
The second step is to save enough money, which can require disciplined budgeting and planning.
According to this basic method of wealth-building, taking on a bit of risk and making prudent investments is the third step.
Establish Money Making Machines called Enterprises, Companies and Firms etc.
Impart the Financial Knowledge to Next Generation and Pass on the Legacy Wealth.
VII. Wealth Creation Videos
1. 15 Steps to GET RICH (Ultimate Guide)
2. 15 Best Books to Get Rich
3. 15 SKILLS MILLIONAIRES MASTER
4.PURPOSE of WEALTH
5. The Rise and Fall of the Medici Family
6. 10 Richest Families in the World | Most Wealthiest Families
7. Rise of the Rothschilds: The World's Richest Family
Wealth creation is simple and easy when done right and deligently.
Discipline and commitment to investing is the key to Creation of wealth.
Starting early in the career will help in multiplying returns by taking advantage of the power of compounding and One can have long gestation period available.
With various investment opportunities available in the market, it is essential to pick the right one that helps in wealth creation.
People who inherit generational wealth have financial advantages over those who do not. For example, when you fund your children’s college education, they don’t have to struggle to pay off student loans. Instead, they could be saving towards purchasing their first home or start a Startup or New Business in the early Age.
Legacy means passing on knowledge, mission, values, traditions and memories—as well as money.
Legacy Wealth creates a solid foundation for your descendant’s financial success, who can continue to build sustainable Wealth over Many Generations...!!