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The Great-West Life Assurance Company, London Life Insurance Company and The Canada Life Assurance Company have become one company – The Canada Life Assurance Company. Discover the new Canada Life

The Great-West Life Assurance Company, London Life Insurance Company and The Canada Life Assurance Company have become one company – The Canada Life Assurance Company. Discover the new Canada Life

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Freedom 55 Financial is a division of The Canada Life Assurance Company and the information you requested can be found here.

How to build generational wealth

Key takeaways

  • Passing wealth to future generations can help give them a financial advantage.
  • There are steps you can take to help create and protect generational wealth, including financial literacy, investing early and continuously, and estate planning.

What is generational wealth?

Also known as legacy or family wealth, generational wealth is anything of monetary value passed from 1 generation to the next. It can include real estate, cash, investments, possessions or a business.

Why generational wealth is important

Passing wealth to children or grandchildren can give them an important financial advantage earlier in life, helping them:

  • Pay for post-secondary education so they’re not left a lot of debt.
  • Buy a home which can help them build their own wealth.
  • Manage financial struggles by providing them with an emergency fund when something unexpected happens.
  • Choose a career based on interest rather than pay.
  • Cover medical costs for disability/illness so they don’t need to dip into their savings to cover those expenses.
  • Give to charity and leave their own financial legacy.

Steps to building generational wealth

Financial literacy

Continuing your own financial literacy can help you understand how to build your wealth. For instance:

  • Risk tolerance helps you recognize the kind of investor you are which can help you build your wealth and save you stress.
  • Compound growth helps you realize if you save $500 per month with an annual return of 6% compounded monthly, beginning at age 25, you’d have $1,000,724 at age 65. But if you save $1,000 with the same annual rate of return beginning at age 45, you’d only have $464,361 at age 65.

Teaching your children, no matter their age, about how to manage their money can help them grow their own wealth, maintain and grow the wealth you create and pass down to them, and avoid unnecessary debt.

Invest in yourself

Gaining a higher level of education, additional certifications or new skills can help you increase your earning potential and make more money over the length of your working life.

Make a plan

Start by outlining your financial goals, and creating a savings plan and insurance plan. Having goals to work towards keeps you motivated to save. Having plans to achieve your goals helps keep you accountable and on track.

Invest early and regularly

The longer your money is saved, the longer it has the opportunity to grow over time.

That’s why you should start investing early, and continue to invest throughout your life in mutual funds, segregated funds, exchange-traded funds (ETFs) and stocks.

Use tax-advantaged opportunities such as tax-free savings accounts (TFSAs), registered retirement savings plans (RRSPs) and registered education savings plans (RESPs).

Develop multiple income streams

While a regular paycheque is wonderful, you could consider a side-hustle to earn additional income. Or start a family business which can grow and be passed to the next generation. You could even invest in property which could help provide income and be passed to your heirs.

Protecting your generational wealth

Estate planning is the most important thing you can do to help:

  • Minimize disputes over your assets between those you leave behind
  • Ensure your loved ones are taken care of
  • Minimize your tax liabilities

Proper estate planning should include:

What’s next?

  • Talk with your advisor to create savings goals, and investment, insurance and estate plan.

The information provided is general in nature and should not be relied upon as a substitute for advice in any specific situation. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors. 

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