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Building generational wealth, or generation wealth, is about creating a financial legacy for your family. If you are thinking about building wealth for your children and grandchildren, you’ll also be wondering: “do I need to build my wealth first, and how do I do that?” Loqbox looks at starting your legacy today and how to build generational wealth.

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What is generation wealth?

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Generational wealth, for some,  is the best kind of hand-me-down. It’s wealth that passes from you to your children or dependents, and even onto their children or dependents. By providing financial security for future generations of your family, generational wealth provides a foundation for your family to build from.

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Giving your children and grandchildren a leg up in life can give them more options and opportunities. This in turn has the potential to let them help their children and grandchildren, and strengthen the family legacy. If you want the best for your family after you’ve gone, there’s something you can do about it while you’re still here!

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It could be money that you leave to your family, but it could also be stocks or assets that they can use or grow further. Generational wealth isn’t just for those who are already born wealthy. With the right tools, anyone can build their wealth, even from scratch. And it may even be easier than you think. So, how do you build generational wealth? Here are some tips.

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Ways to build wealth after 40

1. Invest Early

Building generational wealth takes time, so when you invest in assets that appreciate over time, such as stocks, property, and businesses, you want to start as early as possible. Fortunately, with the rise of fintech, modern investing is more accessible and easier to use than ever.

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As mentioned, investing is a long game. So if you start early you can take full advantage of things like compound interest (which is interest paid on your interest), and your stocks and shares have time to grow. You’ll find that, with a bit of patience, your money will grow and build faster than you think.

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It’s really important to say that investing involves risk. There is always a chance that you’ll end up with less money than you started off with. So be sure to get financial help from trusted sources. Some bets are safer than others, but none are without risk! 

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A great piece of advice when it comes to building generational wealth is to diversify your investments. Don’t put all your eggs in one basket! By diversifying your investments, you can reduce risks and potentially increase returns.

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2. Get on the property ladder

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One of the most effective investments a person can make is in property. House prices may fluctuate but you can often bank on big returns over time. Of course, buying a house often requires a substantial deposit, so you’d need to be in a position to afford that first. But if you can, getting on the property ladder can be a great investment.

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Leaving a property to your children gives them the opportunity to sell it and release its value. But they can also decide to live in it or rent it out, and keep growing the investment for their children. This lets your family continue to build its wealth for later generations.  

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3. Invest in Education

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Building generational wealth means investing in yourself. There’s two ways that you can do this: firstly, you can make sure that you get the training and education that you need to boost your employment opportunities and increase your earning potential. With higher salaries increase the likelihood that you can invest and save higher sums.

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Another way of building generational wealth is by educating yourself on money matters and different financial products, so you can boost your financial literacy. It’s important to help you avoid  financial decisions that don’t reward you, or falling into problems like snowballing debt. Loqbox Learn is a great resource for increasing your financial literacy.

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Understanding your finances is an important part of building your financial literacy. Make sure you check your bank statements regularly. Create a budget to manage your income and expenses (you can read about some simple budgeting rules here). It’s also important to check your credit score. 

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Your credit score is a number that summarises how creditworthy you appear to lenders. It’s generated by the top three credit reference agencies (CRAs) in the UK: Experian, Equifax and TransUnion. Generally the higher your credit score, the more you will be able to borrow and the better interest rates you will be offered. 

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You can actually check your credit scores with each CRA for free and without hurting it using these services:

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ClearScore (uses Equifax data)*

Credit Club (uses Experian data)

Intuit Credit Karma (uses TransUnion data)

*For transparency, we wanted to let you know that ClearScore pay us a small commission if you sign up using this link.

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The quickest way to build your credit score with Loqbox is to start your membership and access Loqbox Grow, Loqbox Save and Loqbox Rent for just £2.50 a week. Using all three products together can improve your credit score by as much as 300 points in the first three months.

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Improvements to your credit score are not guaranteed.

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It’s also a great idea to invest in your children’s education. Investing in your family’s education can help to boost their own earning potential and their ability to manage their money in the future. This can also be a way of improving and building your generational wealth without needing capital. 

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4. Start Saving

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Investing has the potential to grow your generational wealth with great returns, but of course there is always an element of risk. Saving may be a slower way of building generational wealth, but it can be a safer route to take. Remember, slow and steady really can win the race!

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As with investing, when it comes to saving, the earlier you start the better. It’s a long game, so putting even small amounts into your savings can have a big impact over many years. You can also set up savings accounts and ISAs for your children, locking away their money until they reach a certain age.

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5. Use Debt Wisely

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Wait, debt? Surely that’s the last thing you want to be getting into if you’re trying to build generational wealth? Well yes, you have to be careful about generating too much debt as that could leave the  sort of legacy that your family might not want! But it can actually help. 

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If you’re wondering how to use debt to build wealth, the simplest way of explaining it is using borrowed money to grow your investment returns by more than your immediate affordability. However, this does have an even greater risk of losing your original capital.

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One way that debt can build your wealth is by increasing your buying power when it comes to purchasing stocks and shares. Assuming the stock price goes up enough, you can pay back your loan and take the profit. But of course, the opposite is also true. You could lose money and still be in debt! 

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But, as we said before, getting on the property ladder is a fantastic way of growing your generational wealth. Mortgages are debts (and often big ones) but the return on your over years usually works out in your favour. You could also use debt to invest in income-producing assets, such as rental or business. Debt can build wealth, but it isn’t a guarantee and does come with risks.

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6. Start a family business

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OK, so this is something you really have to want to do. It takes a lot of time, money and effort - new businesses often take years to turn a profit. But a family business could be a great way to build generational wealth. It doesn’t have to be a multi-billion corporation: even small businesses and side hustles can help to generate additional family income.

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Rules for building wealth after 50

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In addition to these tips, here are  some strategies for building wealth after 50.

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• Maximise your retirement contributions
• Focus on income-producing assets
• Invest in property
• Be mindful of your healthcare costs
• Pay off your debts
• Maintain good credit
• Protect your wealth with insurance
• Be patient
• Grow your, and your family’s, financial literacy.

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So, building generational wealth requires planning, patience, and persistence. By following these tips and strategies, you can start building your legacy today.