This post was originally published on Defender Network
By Laura Onyeneho
These days there are many ways to make money.
Money, as we all know, helps us function daily. It is the medium that helps us obtain the things we need and want in our daily lives. Money may not buy happiness, but having it in ample amounts sure makes life easier.
However, to maximize your money (get your paper right), here are some questions you need to ask yourself: “How are you making your money work for you?” and “Is your money making money?”
The answer to both questions involves generational wealth, which is essentially any kind of asset that is passed down from one generation to the next (i.e. cash, investment funds, stocks and bonds, real estate properties or even businesses). In other words, generational wealth goes far beyond having an annual salary and a monthly income, most of which is often here today, gone tomorrow.
Generational wealth gives you more flexibility and options in life. It gives you the freedom to live the life you desire and create the stability needed to take care of expenses or life emergencies for generations to come.
Wealth, which again is significantly different than income, is vastly unequally distributed nationwide. Although significant progress has been made toward bettering the lives of Black Americans, since the civil rights movement, the wealth gap still remains.
In 2022, the median weekly earnings for Black Americans was $881 compared to $1,101 for white Americans, according to the U.S Department of Labor.
In addition to the income disparity, numerous other factors, including racial, economical and societal issues, have made it difficult for Black Americans to build generational wealth.
Shelton Dotson is a Northwestern Mutual advisor. He spoke with the Defender to discuss ways Black people can start to build and sustain wealth today.
Defender: Talk about the work you do to help others on their financial journey.
Dotson: I’ve done personal literacy talks with some of my fraternity brothers. I’ve helped people get their feet wet when it comes to credit utilization and loans, and the pros and cons for different financial tools.
Defender: What are some things that have kept African Americans from building wealth?
Dotson: [The racial wealth gap] in the country causes the African-American community to have a smaller surplus and have less ability to save and do more wealth building. They are in survival mode instead of thriving. A lot of times in our community it’s a lot less frequent that they use a financial advisor to help them with a comprehensive financial plan to accomplish things like creating generational wealth, building retirement savings and having risk mitigation aspects taken care of. There are four big things associated with generational wealth which are business ownership, real estate investment, stocks and passive income.
Defender: Financial values can’t be passed down without a strong foundation in basic financial education. How early should this information be taught?
Dotson: It’s important to be taught financial literacy at an early age. I think high school should really be the point to focus on those real-life aspects. How to build credit, how to pay bills, taxes and debt, are some things that [should be priorities]. For example, in high school, I know my parents started teaching me about investing and credit, so once I had access to these resources, I didn’t abuse them. So, if you can grasp the basics, it will be easier to do more complicated stuff like transferring wealth and building assets.
Defender: How can parents be more involved with their children?
Dotson: Parents can start teaching their kids about being financially responsible. Making sure they don’t spend all of their money, build up an emergency savings, or teach them about credit. Build good money habits early. I can’t stress the importance of a financial advisor to help give a better understanding of how to maneuver when unexpected things come up like when a parent passes away.
Defender: What are some tips to help people start building wealth?
Dotson:
– Figure out what your goals are in life.
– Plan a strategy around the goals
– Get a financial advisor for guidance and implementation of strategy.
– Make sure you have vehicles set in place like a savings account
– Focus on investment solutions, whether real estate or insurance.
– Think about legacy estate planning in the case of someone dying. How will the wealth be transferred?