Understanding Generational Wealth

What is generational wealth and what are the implications of it in the United States?

What is generational wealth?

In simple terms, generational wealth is wealth that is passed down from generation to generation. This wealth can come in the form of cash, real estate, investments, and more.

For many Americans, part of their retirement plan includes inheritance and passing down assets. Generational wealth can influence your future generation’s lives by minimizing the potential of them having to suffer through financial hardships or mistakes. Instead of saving for college and taking out student loans that may take decades to pay off, your family members will be able to get a head start on saving for retirement, have the money to start a business, or use the money saved to use in the stock market.

Generational wealth is meant to help your family so that they can continue to grow wealth and use the money for opportunities that they would not be able to seek out if they didn’t have it.

Why are people talking about generational wealth and inequality?

You may be thinking that if generational wealth will help future generations, what could there possibly be to criticize?

The answer is that of course it’s a major benefit to your family members if you can leave a legacy that will positively impact their lives and make things easier for them. What we are now having a conversation about, however, is how generational wealth disproportionately helps wealthier, white families especially compared to their black counterparts.

Black Americans, for example, are less likely to have the opportunity to build wealth that can be passed down. This is due to a multitude of reasons that include fewer opportunities and the fact that while many wealthy families were building a legacy hundreds of years ago, Black Americans were oppressed through slavery, segregation, and racism. The chance to build wealth is severely lacking compared to other Americans.

The New York Times talks about this nuance:

Wealth is, as a recent Yale study states:

“'the most consequential index of economic well-being' for most Americans. But wealth is not something people create solely by themselves; it is accumulated across generations.

While unchecked discrimination still plays a significant role in shunting opportunities for black Americans, it is white Americans’ centuries-long economic head start that most effectively maintains racial caste today. As soon as laws began to ban racial discrimination against black Americans, white Americans created so-called race-neutral means of maintaining political and economic power."

Essentially, black Americans are still playing catch up to previous inequalities and are fighting current inequalities today. Wealth is security and the white Americans who have been creating and growing wealth for generations have a significant step-up than those who haven’t. From politics to education to jobs to power, generational wealth is something that can give opportunities others are not privy to. It’s not just black Americans that are affected either, many immigrants are suffering from lack of generational wealth. While considered to be the “American Dream,” it’s hard to start from nothing.

If you can start creating a nest egg and building wealth to pass down to future generations, you should. However, it’s important to acknowledge and understand that wealth inequality affects non-white Americans and can prevent them from having the opportunities that would put them in positions of power. Because of this, many laws and regulations are based on what wealthy families seek, which in turn adds to the racial inequalities that we see today.

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