Hire Your Child To Build Generational Wealth
So, we have been going on for the past weeks about hiring your child, and how that helps you gain many tax benefits.
As we get to the end of the month, we focus on generational wealth because we know that all the efforts that we put in are directed towards having to be able to pass on a healthy button to your kids as they do the same to theirs.
Just from the above, when ‘you pass on the button to your kids,’ you are finishing what you would have started when you hired them, as you will see later in this article. And, when ‘they pass the button to their kids,’ they cement the meaning of generational wealth they would have played a part in creating when you hired them some 40 or 50 years back – indeed, that is how far long it takes to build those million-dollar investments for the family.
As such, generational wealth is all about the assets (usually quantifiable in monetary terms) that are passed down from one generation to the next. If you can leave a noteworthy inheritance to your descendants, that is called, or, is part of generational wealth. I understand, there could be issues around the classification of such, but if part of the inheritance is real estate, a business, stock market investments, or anything else which contains a monetary value, you may as well have left them generational wealth.
Nevertheless, for it to make sense, this wealth has to be significant – enough for them to make a living out of it and grow it for the generations that come after them.
Why is generational wealth the best for your kids?
If you successfully help your children inherit generational wealth, you would have given them a significant financial advantage over their peers that don’t have it. This way, your kids would probably have the ability/means to avoid student loans and other types of costly debt that many young people find themselves entangled in. Debt is one huge blow that you can ever allow to yourself. So, for your kids, after you make them good generational wealth, they have enough to send towards income-generating investments, assets which appreciate in value, and even towards the purchasing their first home or building.
How then does hiring your children build generational wealth?
1. It allows them the first step into acquiring assets
Wealth that gets to be passed on is huge; it means that you got to start building on this a long time before retirement. Therefore, you must hire your children to set them on this path as early as possible. Remember, we discussed that the issue of age and other rules don’t matter as long as they work for you.
Hiring them is a huge financial step that works really well, provided you have the patience and discipline. Remember that this costs you nothing other than waiting for years. Consider the following example;
If you hire your underage child now, aged 7 years and getting them to save, for example, $5,000 annually in their Roth IRA. By the time they retire aged 65, they will have a projected $3.7 million waiting for them to buy buildings or invest in stock for profits. This is how rich families do it.
If they don’t do this and invest only when they are aged 30, they will only have just $739,000 at retirement – a far cry from the $3 million.
2. You prepare them as they grow in the business that you want to pass down to them
Have you ever wondered why so many small businesses carry the “& Sons” words in their names? Well, it is because many small businesses are geared towards allowing their children to take reigns at a certain point in time. According to The Census Bureau, 90% of all business enterprises in North America belong to the family. And, of these, almost 70% state that they want to pass the company to the next generation.
In as much as it sounds great, it is just sad that only about 30% are successful in passing down their business. What seems to be lacking here? I am, sure it is not education that we get in colleges, but I believe many of them lack the practical knowledge and passion that gets learned at the real workplace. In other words, hire your child to firmly prepare them to take the reins in the family business when you retire or die.
Finally, having considered all the above, make sure that all your debts are paid off. It won’t help it if you make your kids inherit a business that is already heavily burdened by debt.
3. You also get the chance to learn which one of your kids is best suited to lead the family business
We are building businesses in hopes that one day our kids will take over. Exposing them makes us see which one of them would make a good business leader. This is necessary education needed to make sure that the wealth you leave behind does not get squandered by your now-grown children that do not understand first the value of money and, second, how to keep the money growing in the family business.
I say this because a report from Market Watch found out that approximately 70% of families lose their capital in the second generation while 90% lose it in the third. But when you groom them well, these children will know not only to keep the wealth intact, but also to build the wealth further.
Therefore, in a nutshell, hiring your children helps you build generational wealth in a few ways. First, by hiring them, it makes them earn income. This is the same income that they use to buy into other investment vehicles when they retire, on top of your already growing family business. Secondly, you get a chance to prepare them to lead and make difficult financial decisions that pay off in the future. Lastly, hiring your children is an easy way to closely study how they all handle situations in a workplace, as well as how they spend their earnings. From there, you can easily identify the right leader to pass on the button to when the times comes.
Ps. Join our MasterClass – “How to Hire your Child in your Business” this coming August 27th for $147. And learn how you can build Generational wealth for your children.
Click Here to reserve your slot!
