If you had parents like mine that gave me a great start in life then you could consider yourself lucky.

Many parents would like to leave something to their children after they die. They’d like their children to have an easier and more carefree existence than they did. A little extra financial stability might provide that benefit. These are five steps to take to build generational wealth.

1. INVEST FOR THE FUTURE

Investing for the future involves more than just building wealth and sitting on cash. While safeguarding hard-earned money is important, solely holding onto cash for extended periods can erode its value over time.

Instead of hoarding sale proceeds, consider reinvesting them with a clear objective in mind. Is the aim to maximize wealth for future generations? If so, a portfolio focused more on stocks, known for long-term appreciation, might be suitable. It’s advisable to maintain only a limited cash reserve for emergencies (three to six months’ worth) and planned major expenses within a two-year timeframe.

2. DISCUSS MONEY WITH YOUR CHILDREN

Many families have a complicated relationship with money. This can lead to money being a taboo topic. If you want to foster a healthy relationship with money in the next generation of your family, it’s important to embrace the topic of money, provide lessons, and share your experience.

Children get cues from their parents about how to feel about money. Money lessons can be as small as offering your child a weekly allowance and helping them with their budgeting for things they want and need instead of buying whatever they ask for.

Money mindset is formed from childhood and in our early years and this goes on to affect our relationship with money.

3. CREATE AN ESTATE PLAN

Estate planning involves outlining how assets are handled or distributed in case of incapacity or death. A current and adequately funded estate plan not only ensures the smooth transfer of wealth to the next generation but also shields and protects families from the complex probate process. Seek guidance from a proficient estate planning attorney.

4. USE LIFE INSURANCE

Life insurance provides a tax-free benefit for the next generation in the event of your death. Even if you haven’t been able to accumulate many assets for your heirs during your life, the death benefit from a life insurance policy can create wealth where none existed before. Consult a qualified insurance agent to find the type of life insurance that would work best for your family.

It can be difficult to know where to start when it comes to creating generational wealth. Speaking with your children about money, investing for the future, moderating debt, having an estate plan, utilizing life insurance, and using current laws in your favor are steps you can take to create generational wealth.