Generational wealth is more than a buzz word. While young Black professionals build a life that feels aligned with them, it is important to consider how to keep wealth as a generational reality. Whether you’re new to the concept or simply wish to sharpen your knowledge, it’s always worth bolstering your financial expertise.
There is proof that generational wealth is easier to maintain and access for some families over others. It is dependent on several factors, such as race, gender and socio-economic background. Black families have $16 for every $100 a White family has in generational wealth, according to the Survey of Consumer Finances.
Raneisha Toombs, an expert in wealth creation and financial independence, believes knowledge is power when it comes to understanding the nuances of generational wealth.
Myths and Realities About Generational Wealth
Toombs shared that the top myth on generational wealth is that it’s automatically passed to the future generations. According to the Williams Group wealth consultancy, 70 percent of wealthy families lose their generational wealth by the second generation and 90 percent lose it by the third generation. In order to maintain and preserve wealth, it is important that families have adequate teaching and financial schooling.
Another common myth is that generational wealth is only for the super rich. Regardless of your current income, it’s possible to plant seeds to generate future wealth. The main goal is to have something that will accumulate and expand over time. The only thing that you have to have is knowledge. With social media, free tips and tricks for building generational wealth is more accessible to everyone.
Other Financial Tips to Note
Toombs asserts that another common myth is that paying collection accounts will help your score. In fact, the financial expert advises her clients against it. She explains that by law you’re not obligated to pay any collection accounts.
“The moment the original company sold your debt to a collection agency, they sold your obligation to pay,” she told 21Ninety. “It’s illegal to pay the same debt twice and the company has already received payment from the collection agency when they purchased your debt.”
The most important thing to remember is that paying a collection account won’t remove it from your credit report or increase your score. Instead, it will simply stipulate “Paid Collection Account” on the account.
Toombs also noted that closing a credit card will not help your score. She warns that closing a credit card may actually cause the score to decrease.
“Your credit card utilization is a huge factor in your credit score calculation,” she said. “Closing a credit card closes off the available credit limit associated with the account. It can also cause your utilization to increase, which will result in your credit score dropping drastically.”