While many boomers still associate the term “millennials” with reckless youth, millennials on the older end of the spectrum are now middle-aged, many with grown children of their own. The youngest are in their 20s, so none of them in that range are too young or too old to start building a lasting legacy of wealth for their generations.
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“You know, as millennials, we’re in this unique place where building generational wealth is completely within our reach,” says Kellan Klein, co-founder of personal finance website The Savvy Couple. “But it’s not a magic trick, it doesn’t happen overnight. It’s more of a slow cooker recipe. It takes a good chunk of time, a little planning and a large dose of patience. But trust me. It’s totally worth it.”
Here’s what millennials should be investing in to build wealth for their children and beyond.
Invest in a 529 plan so college doesn’t bankrupt you
The oldest millennials are in their 40s. Many have children who are already college age. Many others still have time to plan, and since the Education Data Initiative reports that the average cost of attending a four-year public university now exceeds $102,000, they better get serious if they want to make a fortune. pass down.
“As a millennial parent myself, I focus on the key areas that impacted me the most when I first started out, primarily access to education and housing,” says Jeremy Grant of Knocked-up Money. founder and CEO, private individual. a financial blog for parents and parents-to-be. “Invest in your child’s future education by consistently funding a 529 plan. Start early and take advantage of the compound interest rate. every penny counts. 529 Plans are tax-advantaged when used for approved expenses. You can also change beneficiaries if the intended child decides to go a different route.”
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Invest in insurance. your life is worth a fortune
The best thing you can do for your children is to stay healthy and live long. However, if fate has other plans, don’t let your income die with you.
“Permanent life insurance can be a great way to build generational wealth,” says Eric Mangold, founder of Argosy Wealth Management. “It’s something that can grow over time and provide insurance against market downturns as well as tax benefits.”
Many other experts recommend term life policies instead. Talk to a professional to determine which is right for you, but either way, the stakes are too high to go undetected.
“If something were to happen to me, my family would receive a substantial windfall that would allow them to take care of any pressing financial issues and prepare financially for future goals,” says Jane Murphy, an accountant and financial advisor. , certified life coach and millennial. “Life insurance is an easy way to back you up financially when you can’t physically be with your loved ones.”
According to Forbes, the average term life insurance policy for 20 years, $250,000, costs $13 a month or $159 a year for a 30-year-old man and $12 a month or $142 a year for a 30-year-old woman.
If you can only invest in one thing, make it real estate
Land and property have been America’s ticket to wealth for generations since the country’s founding, and nothing has changed.
“It’s important for millennials to understand that investing in real estate, especially investment property, multiplies your wealth much faster than the traditional investment market route,” says Jay Garvens, business development manager at Churchill Mortgage in Colorado Springs. “Rental properties allow the middle class to earn residual income. I truly believe this is one of the last investment avenues to become a middle class millionaire. You buy the investment and your tenant pays it for you. This route is much more accessible than other residual income streams such as stock dividends or royalties.”
No matter your age or generation, Mason Whitehead, Garvens’ partner at Churchill Mortgage, agrees.
“Real estate is typically the best wealth for all Americans,” he said. “The IRS reported that 71% of all Americans who reported $1 million or more in income on their tax returns over the past 50 years were in real estate or related activities, so there is a very high correlation between making money and real estate.” between owning property.”
Real Estate vs. Stock Market
There is no ETF in the world that can replicate the triple threat of passive rental income, construction capital and capital appreciation.
“Most Americans invest in the stock market through 401(k)s and IRAs that only offer capital gains,” Garvens said. “Very few people accumulate common stocks that have residual dividends. Buying a home gives you an asset that also has the potential for capital gains. Owning an investment property allows you to enjoy capital gains and residual income through rentals, while traditional investments rarely offer this advantage.”
He offered the following example.
“If you take $100,000 and invest it directly in the stock market and get a 10% return, your money will grow to $110,000 in a given year,” Garvens said. “If you take $100,000 and invest it to buy a $400,000 house and it goes up 10% to $440,000, your $100,000 investment becomes $140,000 that year. You end up with a 40% annual ROI, and that doesn’t include the investment property’s principal deduction or tax benefits.”
The stock market is still the simplest investment
Real estate can be a lucrative business, but it can also be complicated, time-consuming and expensive. The stock market is neither of those things, which is why it remains the world’s most affordable wealth-building vehicle, especially now that commission-free brokerages and fractional stock investing are the norm.
“Investing in the stock market allows millennials to benefit from the power of compounding over time,” said Michael Hamelburger, financial advisor, business consultant and CEO of The Bottom Line Group. “Millennials have the opportunity to capitalize on long-term market growth if they are disciplined enough to consistently invest in a diversified portfolio of high-quality stocks or low-cost index funds. The compounding effect, where dividends and capital gains are reinvested to generate additional income, is what this strategy takes advantage of. It is absolutely necessary to take a long-term view and continue to invest even when the market is underperforming.”
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This article originally appeared on GOBankingRates.com. 4 Investments Millennials Should Make to Build Generational Wealth for Their Children