Black Families and Generational Wealth Tips: Build a Healthy Financial Foundation for your Teen.
Are you in the process or thinking about how you are going to build generational wealth? If so great! In the meantime, here are three things you can do in the meantime that does not require any money.
Generational wealth is a term that has grown in popularity over the last few years, especially in the black community. It’s no surprise that many African American families struggle to reach the pinnacle point of having something to pass down to the next generation. Studies have shown that African American families have significantly less wealth than White families, even after reaching middle class. A 2019 Survey of Consumer Finances shows that the average African American family had a median net worth of $24,100, compared to $189,000 in the average White family. Not to mention, over 63% of Americans are living paycheck to paycheck, ultimately making the reach towards generational wealth seem hard to reach.
While it is important to continue the mission of creating generational wealth in the black community, it is just as important to help our youth build a strong financial foundation. A financial foundation implements strategies and actions that will result in a positive financial head start for our children. The best thing about building a financial foundation is that it cost nothing!
Here are three ways you can build a strong financial foundation:
1. Use your time, not your money to pay for college.
Many families believe that student loans are the only option to help pay for college, and the fact is this is untrue. Student loans should only be used to fill financial gaps in tuition, they should not be used as a sole source of financing. It’s very easy to sign on the dotted line and be on your way. However, many students are unaware of what they are signing up for until they are in their 30’s still paying for a past education waiting on student loan relief from the president.
The fact is you will pay with your money or YOUR time, or you can pay with time. Take the time to create a financial plan that will minimize or eliminate the use of student loans. Look into other options such as local schools, community colleges, and online programs which may provide more affordable options. Don’t underestimate scholarships. Scholarship awards are based on a numbers game, the more you apply the better your chances of winning. There are scholarships for every student. No longer do you have to be an athlete, honors student, or have an extremely high GPA. Scholarships today are very diverse in the students they award. Creating a plan does take time, but it can eliminate the need to use your own money to pay for college.
2. Build an 800+ credit score by the age of 18.
Credit scores and credit history can affect many aspects in one’s life. Credit history can affect where you live, types of home and auto loans you can receive, employment, and it can even affect the cost of your living expenses. Adding a child as an authorized user on your credit card can help those with limited or no credit history start building a credit file. This allows them to get better credit offers once they are older. Many credit cards will allow you to add a child that is 16 years or older as an authorize user. With careful monitoring and responsible handling of the account, over the course of a few years this action can really help with building a positive credit history. The higher your credit score the more money you save. It has been reported that if you implement this strategy correctly, your teen can have an 800+ credit score by the age of 18.
3. Open a Business for now and for the future!
Teenage entrepreneurship is on the rise. Starting a small business at an early age is more than just about making money. It provides real life experiences that can be beneficial throughout ones career. Starting a business can teach your teen that passion is marketable, and sometimes even scalable. It fosters creativity and a financial skill beyond the spending and savings strategy by teaching teens how to make money, how to run a business, and how to scale a business. There are many financial benefits that may be helpful down the road. For example, opening business credit early and using it responsibly can create a positive business credit history that may come in handy when your teen wants to get a business loan in the future.