This blog is written and sponsored by Joanna Doiban, founder of Million Dollar Baby. She teaches her clients how to build generational wealth for their children starting as early as 16 weeks old. 

Hey there, fabulous parents! Imagine giving your kids the ultimate gift that keeps on giving: generational wealth! It’s not just about stacking cash; it’s about creating opportunities and freedom for your little ones while kicking financial struggles to the curb. 

With the right game plan, you can build a legacy of wealth and savvy money smarts that’ll be passed down through the family tree, helping future generations soar. 

In this resource-filled post, Joanna Doiban, the brilliant mind behind Million Dollar Baby, is here to share six super-smart financial strategies that’ll help you pave the way for your kids’ bright futures. Get ready to empower them with the tools they need for financial success, ensuring they have a rock-solid foundation for years to come!

Why It’s Important To Start Building Generational Wealth

Building generational wealth for your child is super important for a bunch of reasons. First off, it gives them a financial safety net, which means they have more options and opportunities that they might not have had otherwise. Whether it’s paying for a great education, joining fun extracurriculars, or just having the freedom to chase their dreams, having some wealth can really open doors for their growth and success.

Plus, creating generational wealth helps break the cycle of financial struggle. It’s a long-term game that not only benefits your kids but also future generations. Wealth isn’t just about having money; it’s about creating a legacy that includes values, lessons on financial responsibility, and a healthy relationship with money. Teaching your kids how to build, grow, and manage wealth gives them the tools to take charge of their financial future.

1. Start Early And Leverage Compound Interest

One of the best ways to build generational wealth is to start early and really take advantage of compound interest. This is where your investments can grow over time because they earn interest on the interest. The earlier you start putting money into an account that earns interest, the more your wealth can grow thanks to compounding.

Let’s break it down with a quick example: if you start saving $200 a month when your child is five, versus waiting until they’re 15, the difference is huge by the time they hit 65. That extra ten years of saving can mean having about 50% more by retirement!

When you keep contributing consistently, compound interest can become your child’s strongest ally in building wealth. Think about opening a savings account, a custodial investment account, or even investing in a cash-value life insurance policy to make the most of compounding from the get-go.

2. Choose the Right Financial Tools: 529 Plans vs. Cash-Value Life Insurance

The next strategy involves choosing the right financial tools to build wealth for your child. The best tool depends on your family’s values and goals, but here are two options that can serve different purposes:

• 529 College Savings Plan: A 529 plan is a popular way for parents to invest for future college expenses. It’s a tax-advantaged savings plan specifically designed to encourage saving for education costs. Parents can choose which investments to make within the plan, and the earnings grow tax-free if used for qualified educational expenses. Because it follows the market though, it could also lose money over time. In addition, if the funds are not used for college, there can be penalties and taxes.
• Cash-Value Life Insurance: For parents who want more flexibility and a less conventional option, contributing money to a cash-value life insurance policy is a better choice. With cash-value life insurance, parents can access the funds at any age for any purpose. Things like education, down payment on a house, or other expenses can all be possible without incurring the penalties associated with other accounts. Additionally, these policies provide a tax-sheltered growth environment, allowing your wealth to grow without being diminished by taxes.

Each financial tool comes with its own benefits, so it’s essential to evaluate which is best aligned with your family’s goals for wealth building.

3. Make Small, Consistent Investments Over Time

Consistent investing is really important for building generational wealth, and remember: starting small is way better than not starting at all. You can kick things off with a savings account and set up automatic transfers that work with your budget. Even if your contributions are modest, they really add up over time. What matters most is sticking with it, not how much you start with.

Once you have a savings account going—like a custodial investment account, a 529 plan, or a cash-value life insurance policy—you can funnel those small savings into it. By automating the investment process, you make wealth-building a regular habit instead of something you have to think about all the time.

4. Teach Your Children About Wealth-Building Early

Financial education is super important for building generational wealth, and it’s about more than just stacking cash. When you teach your kids about money, you’re helping them grasp the value of wealth-building and ensuring they can carry on the legacy you’ve started. Here are some key benefits of getting that financial education going early:

• Develop Financial Skills: Teaching children about budgeting, saving, and investing helps them develop essential financial skills that will carry them into adulthood. Children who learn to manage money are more likely to make responsible financial decisions.
• Instill Financial Confidence: Understanding financial concepts gives children confidence in handling money. They learn that money is a tool for achieving their goals and not something to be feared.
• Foster a Positive Money Mindset: A positive relationship with money leads to healthy financial habits, resilience, and a sense of empowerment. When children understand how to handle money, they can make better decisions and prepare for financial challenges.

Educating children about money will help them not only grow wealth but sustain it, enabling future generations to build upon the foundation you’ve laid.

5. Balance Current Financial Responsibilities With Long-Term Wealth-Building

One common challenge parents face is juggling their current financial responsibilities with the goal of building wealth for their kids. It’s tempting to put off investing in your child’s future until you feel more financially stable, but that can mean missing out on the amazing benefits of compound interest. Let’s be honest—many of us think we’ll start investing when we feel “more stable,” but that moment often feels just out of reach.

To find a good balance, try keeping your kids’ investment funds separate from your own finances. This way, you can contribute without feeling overwhelmed. Set a monthly amount that’s affordable for you and set up automatic transfers to an investment or savings account for your child. This makes the whole wealth-building process systematic and stress-free, while also keeping your long-term goals in sight.

6. Avoid Common Mistakes When Building Generational Wealth

When it comes to saving and growing wealth for your children, there are several common mistakes that parents should avoid:

• Not Starting Early Enough: The earlier you begin, the more you benefit from compound interest. Starting late means missing out on significant growth opportunities.
• Lack of Diversification: Diversifying your investments is key to mitigating risk. It’s important to understand the types of financial tools available and select a combination of growth options that align with your goals and risk tolerance.
• Not Setting Clear Financial Goals: Having clear goals ensures that your efforts are focused. Knowing whether you’re saving for education, a first home, or a long-term financial cushion will determine the right strategy.
• Failing to Review the Financial Plan: Regularly reviewing your wealth-building plan is critical for staying on track. Conduct annual or bi-annual reviews to ensure progress toward your goals and make adjustments if needed.
• Neglecting Financial Education: Teaching children about money from a young age is one of the most powerful ways to ensure that generational wealth endures. It’s important to impart financial knowledge so that future generations can continue building and growing wealth.
• Lack of Financial Safety Net: Without a financial safety net, unexpected challenges can jeopardize your wealth-building efforts. It’s essential to maintain a reserve that can cover emergencies and prevent setbacks.

Ensuring the Sustainability of Generational Wealth

Building generational wealth isn’t just about piling up assets; it’s really about sustainability. To create a solid wealth plan, regular check-ins and ongoing education are key. Make sure to review your financial strategy every so often to see if it’s still on track and adjust as needed. Financial needs and goals can shift over time, so staying proactive is super important.

Also, don’t forget to pass on financial education to your kids. Give them the tools they need to manage, grow, and maintain the wealth you’ve built. By encouraging responsible financial habits, teaching them about investing, and explaining the importance of diversification, you’ll help ensure that the wealth you create lasts well beyond your lifetime.

Building Generational Wealth Is An Intentional Process

Building generational wealth takes planning, education, and a consistent approach. By starting early, choosing the right financial tools, making small but steady investments, teaching your kids about money, balancing your responsibilities, and steering clear of common pitfalls, you can create a financial legacy that benefits not just your child but future generations as well.

Wealth isn’t just about having money; it’s about opening up opportunities, achieving financial freedom, and living a life that aligns with your goals. The great news is that it’s never too early—or too late—to start taking the steps to build generational wealth for your child!

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Joanna Doiban is a Wealth Activator for busy working moms who want to invest their hard-earned money so their family can have a safety net for their futures. 

As a passionate career mom of 3 boys, Joanna was determined to set her sons up with the best chances at accumulating true wealth even though she herself doesn’t earn 7-figures, yet.

Joanna has helped hundreds of American families at all income levels get ahead of the curve when it comes to growing a nest egg for the future.

She hopes to instill the urgency of money mastery to all parents so their children will always be supported by money throughout their lives.

As the founder of Million Dollar Baby, she teaches three pillars of wealth – wealth energy activation, money organization and easy investing –  to busy women and moms, revolutionizing this male-dominated industry from telling and direction to educating and intentionality.

With a Bachelor’s Degree in Finance and a Life Insurance license in dozens of states, Joanna is a trailblazer and thought leader in Financial Self-Care and Wealth Education for women and their small kids. 

What sets her apart is her 3 checking accounts method which has helped so many women get organized with their money, never again wondering “Where does all my money go?”

The core focus is knowing your data – from fixed expenses, to day to day spending; when you can see where all your money goes, you can save and invest with intention. Book your discovery call with Joanna today.