5 Huge Lies About Generational Wealth

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The term “generational wealth” implies an infinite security for a family for decades to come. Some assumptions about immense inheritance and family legacy, however, are not true. How long this wealth lasts, and how it’s managed differ from generation to generation and don’t always ensure a carefree, rich lifestyle. Here are some commonly held beliefs about generational wealth that do not always ring true.

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Generational Wealth Lasts Forever

Smart investments and money management skills are not always passed down with wealth. A staggering 70 percent of wealthy families lose their wealth by the next generation, with 90 percent losing it the generation after that. Sustaining substantial wealth takes financial savvy–something that not all rich parents are passing along to their heirs. It’s reported that 64 percent of parents admit they’ve talked little very little (or not at all) about their wealth to their children. Without that education, and with money going to several different children, the inheritance may be spent quickly without any means of recovery. 

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Heirs Are Always Brought Into the Family Business

Not every child of wealth is given a roadmap of how to maintain and grow it. There’s no daily briefing on how your parents’ business runs simply because you’re a blood relative. Some generations don’t even believe younger people are capable of handling money well. According to a study, 24 percent of baby boomers think their kids will not be able to handle wealth properly until they’re 40, and 50 percent of wealthy individuals over the age of 70 agree. Financial advisers recommend breaking that cycle, and giving the next generation a plan of action with directions on how to spend, save, give back in philanthropic efforts and build sustainable wealth.

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Millionaires Usually Come From Generational Wealth

Not every person who makes millions comes from a family who has money. A 2019 study published by Wealth-X found that around 68 percent of those with a net worth of $30 million or more made it themselves. Millionaires who are self-made tend to rely more on equity investments, while those who come from wealth rely on real estate to make the majority of their money.

Wealth Is Recession-Proof

Even when there is some guidance given on how to invest the money passed down from the generation before–that guidance isn’t immune to the volatility of the markets. If the family’s money is in stocks or real estate, those become worth a lot less if a recession hits. This could greatly drive down the family’s capital, destroying it in a matter of months if certain measures aren’t taken.

Family Businesses Have Staying Power

Only a little over 30 percent of all family-owned businesses make the transition into the second generation. That means most of these types of businesses last for one generation, then close down or fail to make it. There are only 3 percent of all family businesses operating at the fourth-generation level and beyond. Just because a generation starts a lucrative business does not ensure generational wealth for any foreseeable timeframe.

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Last updated: Oct. 15, 2021

About the Author

Sam DiSalvo is an LA-based comedian, writer and actor who's performed all over the country. Her written work has appeared in numerous digital publications. As a copywriter, she's worked with a variety of major brands including GoldieBlox and Thrive Causemetics. Sam loves dogs and is currently perusing leisure suits to buy for her corgi mix, Barry

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