Scott Tominaga: Crafting Strategies for Creating Generational Wealth
Building generational wealth involves not only making sound financial choices but also serving as a positive role model. By demonstrating the foundational principles of good personal finance to your family, you are laying the groundwork for a secure financial future, notes Scott Tominaga. This can include instilling values of saving, investing wisely, and managing money effectively, setting the stage for long-term financial stability and success across generations.
Prioritize Savings
To avoid the common pitfall of intending to save what's left at month-end but failing to do so or overspending, a more effective strategy is to establish a budget to oversee spending, ensuring dedicated funds for savings. Implement automatic payments to yourself each month for consistent savings. Start by determining a percentage or set amount for savings post-expenses. If you have multiple savings goals, allocate funds into separate accounts. Explore high-yield savings accounts for added interest on your deposits. Set up automatic transfers to each account to witness their growth. For long-term goals, consider investing in certificate of deposit (CD) accounts for guaranteed returns.
Establish an Emergency Fund
A crucial tool for building generational wealth is ensuring financial security for emergencies or income loss. This is where an emergency fund comes into play. The absence of such a fund often leads to debt or premature tapping into retirement accounts, incurring penalties and missing out on growth opportunities. The goal is to save enough to cover several months' expenses, a process that requires time, says Scott Tominaga. You can focus on consistent contributions and increase savings by cutting costs or creating additional income streams. Remember, refrain from withdrawing funds unless it's a true emergency.
Engage Children in Financial Discussions
One often-overlooked aspect of building a robust financial foundation is involving your family, especially your children, in the conversation. By engaging them in financial discussions, you can help them grasp essential money concepts from a young age, fostering their financial literacy alongside yours. Consider giving them an allowance and discussing with them how they plan to manage and allocate it, teaching them valuable budgeting skills and financial responsibility early on, adds Scott Tominaga.
Invest in Children's Education
Once you've made substantial progress on building your emergency fund, you can consider allocating a portion of your discretionary income towards other significant financial objectives. One common goal is setting aside funds for your children's education. If your financial aspirations include creating generational wealth, viewing college savings for your kids as an investment in their future earning potential can be a strategic move that aligns with your long-term financial plans and goals.
Explore Real Estate Investment Opportunities
Another avenue for investment worth considering is real estate. This option offers not only the potential for rental income but also the opportunity for property value appreciation over time, says Scott Tominaga. Moreover, real estate can serve as a robust asset to pass down to future generations. Diversifying your real estate portfolio by exploring different property types, ranging from residential to commercial, can further enhance the stability and growth potential of your investments.
Scott Tominaga earned his degree in Business Finance from Arizona State University. For more articles on finance and investment, visit this blog.
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