Guide To Building Generational Wealth in Canada

Think of the time you wished to pursue something you were passionate about. Most of us would be immediately reminded of the paralysing clutches of financial strains that stopped us from following our passion. Now, move on to a different scenario. Imagine your next generation, the little ones, being able to go freely after their dreams, live them out and try their hand at anything and everything their heart tells them to. Well, this is what generational wealth gives you! The freedom to choose. A financial leverage and an advantage that can never be matched by anything else. Between 2016 and 2026, Canada expects an estimated $1 trillion of wealth transfer from generation to generation. Technically, we’re in the middle of the biggest wealth transfer in history. In the economic eden of the world, building generational wealth is the golden harvest. With a world obsessed with transitory gains, this will be your lasting legacy. Stay with us as we discuss the various ways to generate, pass on and manage generational wealth. Follow our proven strategies and truly leave a better world for your family. 

Getting Hold of The Concept: What’s Generational Wealth?

In simple terms, generational wealth refers to financial resources passed on from generation to generation.. It includes money, investments, properties, businesses, and other forms of wealth. That’s how a formal definition would go. But the crux of it is really this. Every generation doesn’t need to work hard. The vision and foresight of some can fulfill the dreams and lives of many. As you embark on this journey, It’s important to understand that building generational wealth takes time. It requires planning, strategising and persisting. So, without much further ado, let’s chart our course ahead. 

Building Generational Wealth: The Magic of Investing

The secret to building wealth is investments. That’s it; that’s the mantra right there. Investment is the art of making your money earn for you. It’s popularly said in the financial world that wealth is what you gain even while you’re asleep. It’s time to break the mould and reverse the rules. Start directing your savings to investments, take more risks, and invest in the right avenues. Take a look at some popular investment choices that can help generate significant wealth. 

• Stock Market

Gone are the days when only consultants and investors used to discuss stocks. The unparalleled growth potential offered by stocks can lead up to twice, thrice or even 20x of your original investment. There’s no denying the risk factor, but one can easily learn to navigate the stock market with practice and education. Open a brokerage account and start with smaller amounts in the beginning. As you become well-versed in the market trends, start investing bigger sums to gain even bigger profits.

• Exchange Traded Funds (ETFs)

If stocks don’t excite you, ETFs are a good alternative for passive income. An exchange-traded fund is like a pool of stocks, making trade easier and more convenient. When you invest in an ETF, you get a share of a number of stocks. Such financial diversification results in much lesser risk than investing in individual stocks. After setting up your brokerage account, you can comfortably trade in ETFs on the exchange.

• Real-Estate

“The best investment on earth is earth”, said the famous real-estate investor Louis Glickman. With high capital appreciation, real estate is indeed the golden goose of the investment world. It is wealth in the truest sense of the word. Not only can one earn monetary gains from this investment, but these properties can also be passed on easily to the coming generations. In this sense, real estate investments are among the most tangible forms of generational wealth.  

• Build A Family Business

A family business gives you the full opportunity to involve members of your family in the operations and management of your business. This way, the profits remain within the family, and greater career advantages are available.. Moreover, just like properties, a business can also be easily transferred to the next generation. A family business is a great chance for financial security and wealth generation. 

• Acquiring Life Insurance

A life insurance policy in your kitty can be a great strategy for building generational wealth. The primary benefit of life insurance is that it offers more money to pass on. There are multiple tax benefits on life insurance policies in Canada. It offers financial cover in times of distress and helps accumulate greater wealth for the future. The funds thus collected can be used to maintain the standard of living, pay off debts and cover other financial expenses. 

Passing the Baton: How to Transfer Generational Wealth?

Once you’ve accumulated enough wealth, it is time to implement an appropriate mechanism to ensure a smooth transfer of this treasury. The most important thing in transferring generational wealth is understanding Estate Planning. Estate Planning involves legally specifying how your wealth will be treated once you’re gone. Will creation is but one of the many parts of Estate planning. Once, you’ve planned your estate and clarified how you wish your wealth to be distributed later on, you’ll need to assign some roles:

• • A liquidator or an executor would be the person primarily responsible for managing your estate post-death. It includes debt payments, tax filings and asset distribution. 
  • A trustee, would oversee how and when these assets are distributed to the descendants. 
  • Finally, a legal guardian would take care of your minor children during the untimely or early demise of parents. 

The timing of the transfer is a matter of discretion. While living, Wealth transfer ensures you’re always there to guide and supervise. It’s especially helpful when someone from the family buys a house or goes for higher education. On the other hand, wealth transfer after one’s demise ensures you have greater control over your assets throughout your lifetime. 

Managing Generational Wealth & Guiding the Next Gen

Having wealth and not knowing what to do with it is far worse than not having wealth at all. Up until now, we have emphasised the many ways to build and transfer wealth. Now that you have it, it’s equally important to ensure it’s used in the best ways possible. Settling with a legal transfer isn’t enough. Once you’ve equipped them, it’s also important to empower them. 

The most important step here is financial education. Just like investing, when it comes to financial education, start early. Introducing them to the basics of investing and saving as early as 18 is a great idea. So that when they’re actually making real decisions, they already know what they’re dealing with. If you have a family business, involve the next generation in key meetings. Mentor and train them early to give them a taste of how things work in reality. In essence, it’s all about foresight. Passing on the baton involves a two-way conversation. It is as important for the elders to impart their wisdom as it is for the young to inherit wealth responsibly. 

Wrapping Up

A lot of us might’ve never experienced the privilege of inheriting hefty fortunes, but that does not mean we can’t be the ones to pass it on. Generational wealth is a blessing for decades and generations to come. Building generational wealth involves planning your investments, passing them on and ensuring their proper management. Ours is a time when investing has become cool. And rightly so. Today, every financial advisor advises starting early. We’re not just being proverbial here. It’s not a feel-good financial philosophy, it’s the power of compounding. When you approach your investment with a long-term perspective, you are more consistent in your deposits and more patient with your returns. While most would tell you to start investing merely. We advise you to do it with a vision.

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Frequently Asked Questions (FAQs)

How to start building generational wealth?

Investing is the key to building generational wealth. Educate yourself and start investing in stocks, real estate and other avenues as early as possible. Starting early gives you more time. And the longer the investments, the better the returns.

What’s the cost of building generational wealth?

Building wealth is the art of generating additional income from your existing income. Be it stocks, real estate or any other investment, you’d need to have enough savings to direct towards these options.

How do you accumulate wealth in Canada?

Wealth can be accumulated in Canada by financially educating yourself. It’s important to prepare a financial vision for yourself and then start investing accordingly in order to accumulate wealth in the long run.

What is the 3 generational wealth rule?

In wealth management, the three-generation rule emphasises sustaining wealth across three generations. It states that the first generation earns wealth, the second maintains it, and it often gets depleted by the third.