Our previous article explored the essential first steps to financial success—building a solid foundation through financial education, saving for stability, and reducing debt.
These steps are critical in creating a strong financial base.
But once you’ve mastered these foundational elements, it’s time to look toward the future and think bigger: How can you make your money work for you? How can you build a legacy that will last for generations?
The next phase in your financial journey is about investing and creating generational wealth.
These key strategies move you from merely surviving to truly thriving.
In this article, we’ll explore how to make strategic investments and build wealth that can be passed down, empowering not only your future but also the financial success of your children and grandchildren.
It’s time to take the next step in turning your paycheck into lasting prosperity.
Investing for Growth
Following up on our action steps, I left you with some action steps in our last article, Building Wealth Step-by-Step: Foundations for Latinos.
Let’s take the next step and figure out what to do with that savings after you’ve created an emergency fund.
Investing is one of the most powerful tools for building long-term wealth. While saving money provides a solid foundation, investing allows your money to grow over time, compounding interest and generating returns far exceeding what a regular savings account offers.
The sooner you start investing, the more you can take advantage of the power of compound interest. Whether you’re aiming for retirement, purchasing a home, or leaving a legacy for future generations, investing is the path that turns your income into lasting financial security.
Several investment options are available, each with its benefits. Stocks represent ownership in a company and can offer high returns, but they also carry greater risk.
On the other hand, bonds are loans to governments or corporations and are generally considered safer, though they offer lower returns.
Mutual funds pool money from multiple investors to invest in a diversified portfolio of stocks, bonds, or other assets, making them a good choice for those looking to reduce risk.
Retirement accounts like IRAs and 401(k)s provide tax advantages and are essential for long-term financial planning. The key to getting started is to invest what you can, even in small amounts.
Over time, as your investment knowledge grows and your financial situation improves, you can increase your contributions and diversify your portfolio. Remember, the most critical step is to start. Every small investment brings you closer to financial independence and wealth.
Generational Wealth – Building a Legacy
Generational wealth is the concept of building financial stability and prosperity that can be passed down from generation to generation. It helps secure the financial futures of children, grandchildren, and others.
This type of wealth provides financial security and opens up opportunities for education, homeownership, and entrepreneurship that might otherwise be out of reach.
Estate planning tools, such as wills, trusts, and life insurance, may be essential to preserve and protect wealth.
These tools help you distribute assets according to your wishes and minimize potential tax burdens. In the Latino community, family values often play a central role in wealth-building, where the collective well-being of the family is prioritized. By planning for the future and making intentional wealth-building decisions, you can create a lasting legacy that will support the success of future generations.
Some Quick Steps You Can Take
Here are five easy action steps for Latino new savers and aspiring investors focused on building wealth for future generations:
Start with a Retirement Account:
There are many ways to save for retirement. Among them are opening an IRA (Individual Retirement Account) or contributing to a 401(k) through your employer. Even if you can only contribute a small amount at first, say $50 a month, setting up automatic contributions ensures you’re building for the future with tax advantages.
Create a Basic Will:
Make sure your assets and wishes are protected by writing a simple will. You don’t need to make it complicated—ensure that it reflects who should inherit your belongings and how your estate will be handled. Many online platforms offer affordable, straightforward will templates.
I will get into wills later, as there are other options as well, such as creating a trust. Trusts may help your loved ones avoid probate court. However, for starters, make sure that you fill out any beneficiary information from any of your accounts. For example, your bank accounts, CDs, or investments will often allow for a payment directly to the beneficiary. This will often supersede a will or probate court.
Have something down on paper and consider getting it notarized.
Establish an Emergency Fund:
Set aside at least $500–$1,000 in a separate savings account for emergencies. This fund will give you the peace of mind needed to focus on investing without the constant worry of unexpected expenses. Yes, most financial advisors will recommend you save 3 to 6 months – and this would ultimately be your goal. In the meantime, try to put something aside – aim for $500 to $1000 for emergencies. As you save and invest, consider putting a little every paycheck into that emergency fund. And don’t use it to go to the movies or buy Christmas presents. Use it for real emergencies – a car repair or emergency dental visit, for example. Over time, it will grow.
Invest in Low-Cost Index Funds or Mutual Funds:
You might consider investing in low-cost index funds or mutual funds, which provide broad market exposure and reduce the risk of putting all your money into individual stocks. Start with a small, manageable amount and increase it as your financial situation improves.
Talk to a Financial Advisor:
Schedule a consultation with a financial advisor, even for just a one-time session. Many offer affordable services and can help you get started on your investment journey, as well as guide you through creating an estate plan that aligns with your family’s values and goals. These steps provide a straightforward path for Latino individuals and families to begin building wealth and securing a financial legacy for future generations.
