The 3 Types of Generational Wealth

So I’ve been working with real estate investors and wannabe real estate investors, people who want to get into the game of real estate because they recognize that it is a fantastic way of building wealth and accumulating assets. It’s fantastic, right? There’s a reason why real estate has made more millionaires than any other asset class. And it’s largely due to the fact that you don’t have to be particularly bright to succeed in real estate. And so this attracts a lot of people. You know, a lot of people, when they first get on their financial freedom journey, maybe they read the book like Rich dad, poor dad, which turned them onto the idea of not just trading your time for money, but starting to accumulate assets that can produce cash flow for you. They can build equity over time. And so a lot of people will step into real estate, seeing that as, like, the golden opportunity. And I’ve had the fortune of working with hundreds of investors and hundreds of individuals who want to go build their own real estate investing business.

And when I ask them for what their motivation is and what it is that they’re trying to build, because it’s really important that before we build the rocket ship, before we build out the skills, the beliefs, the traits that you, as the pilot of that rocket ship, need to have, then we get really clear on where that rocket is even trying to go. Right. The rocket we’re going to build to go to Mars is different than the rocket we build to go to the moon. So we need to get very clear first before we do anything else. Where is it that we’re trying to go? And in that conversation, it’s always been interesting to me that there’s two words that come up over and over and over again as to why people want to be in real estate, and those words are generational wealth. Now, this has always been a really interesting term to me because on the surface, it seems very obvious, right, when somebody says, I want to create generational wealth, it seems very obvious what they’re talking about. But in reality, there’s actually three types of generational wealth. Three.

And the one that people speak about most often is actually, in my opinion, the least valuable of all. So the common way that people talk about generational wealth is usually through the lens of, I want to build generational wealth that I can leave to my children. I want to be able to pass on assets and cash flow to my children, to my grandchildren. I want to help my family be in a better position than I was when I started off. That’s what most people talk about, when they talk about generational wealth, they’re talking about it through the lens. Legacy. And sure, real estate is actually a fantastic way of creating this type of generational wealth that can transcend and be passed between the generations. There’s a lot of tax benefits that come associated with real estate, and those tax benefits get pretty juicy when you die and pass your assets to your children.

So that’s a fantastic way of doing just that. But in my book, that is the least valuable form of generational wealth. And the reason for that is because you’re just passing on the asset itself. You’re passing on the tool, but you’re not necessarily passing on the machine. You’re not passing on the knowledge of how to use that tool. And that’s where the other two definitions of generational wealth come in. And these are the forms of generational wealth that I find far more compelling. So the first one, the second definition, rather, of generational wealth that you can think about, and I want you to think about this hard in the context of your own life right now, because this is going to play out over the course of the rest of your days.

Generational wealth, for me, is the type of wealth that continues generating wealth into and on itself without necessarily more inputs from you. This is the machine that is producing more. And so this is passive investments. This is owning assets that continue putting money back into your pocket that then you can take and redeploy to acquire more assets. And that wealth generates more wealth. And this is the secret to winning the wealth game that you know, if you’ve read the book rich dad, poor dad, if you spent any time consuming my content, you understand that you can’t win the money game, just trading your time for money. You have to acquire equity. You have to build a machine that is able to produce wealth in your stead.

And the best way to think about your money is as though your money is a worker. And the goal of that workers to go out and produce more workers. And then those workers come in, they produce more workers. And this is the idea of compounding interest, right? So that’s the second definition of generational wealth, is to build a machine that continues producing wealth without your inputs. I like that form of generational wealth way better. The beauty of that, too, is that you can pass that on to your children rather than just a large chunk of money. You can pass on the machine. And if it’s running without your day to day oversight, without you having to be involved in the systems, procedures, the operations, then there’s no reason that your children, your grandchildren have to be involved in that process either, right? So that’s the generational wealth that I really am trying to strive towards.

The third definition of generational wealth, and this is potentially the most valuable, and in truth, the one that will transcend generations. Now, the reason children of rich families tend to make more money over the course of their life, why zip code is the number one determinant of your financial future. The reason for that is because people who are from wealthy families think about money differently. They have access to different information in how the world works, how the economy works, how they can use their skills to exchange for value. Whereas when you’re poor and you’re middle class, the only way that you’re taught how to make money is to exchange your time for money. Right? As you move up through the ranks, though, and you start to unpack, oh, there are better ways of making money, you’re educating yourself right now, the most valuable form of generational wealth is that knowledge. It is that mindset, is that belief. It is that perspective that you now have of how you see the world.

And passing on that to your children, to your grandchildren, is the most valuable thing, because you’re teaching them how to use the tool, rather than just giving them the tool and then saying, figure it out on yourself. The truth is, most people who are gifted money or gifted assets, gifted a machine, they just destroy it because they don’t really understand how it works. This is the form of generational wealth that I’m so interested in helping you pass on to your family, to your kids, to your community, the people around you. This is why we do this. Content the pass on what I’ve learned to the next generation, the next phase of people. You might be older than me, you might be younger than me. It’s not really about the age. It’s about passing on information that can serve you.

And then, in truth, my hope is that you can take that information, you can apply it to your life, you can see massive transformational change, and then you can pass on that information to the next person. And that, I think, is how we create the truest form of generational wealth, where collectively, we can all, as a society, rise up out of the muck. We can, each and every one of us do better because we have access to the information, the thoughts, the beliefs, the habits of the people that end up winning the money game. So I hope that serves you. I hope those three definitions of generational wealth give you a new perspective to think about money. If it did let me know. Shoot me a DM, leave a comment, leave a review, do whatever it takes to get the message to me. If that’s a carrier pigeon, if that is a smoke signal, I will be on the lookout.

So that’s gonna do it for me, guys. I’ll catch you in the next episode. Until then, stay hyper focused, my friends.