Imagine that from a young age, you knew that, someday, you’d inherit some of your grandparents’ great fortune. Inheriting intergenerational capital can be a great gift. However, it also comes with responsibility. It’s kind of like the story of “The Goose & the Golden Egg.”
Do you know that story?
A countryman once found a wonderful goose that laid a golden egg every morning. The man took the eggs to the market to sell them. With time, he started growing rich. However, he was also an impatient man. Why did his goose lay only one egg every day? He wanted more! Finally, he was struck with an idea. If he killed the goose and cut her open, he could get all of the golden eggs at once! After cutting the goose open, he was very disappointed to see that there were no eggs inside.
Receiving an inheritance is like receiving a goose that lays golden eggs. If you try to get all the eggs out at once, it won’t get you very far. You’ll realize that you’ve spent all the money and have nothing left. However, if you take a different approach and try to grow the farm (and make more golden geese), you can build financial stability for a lifetime.
To do this, follow the one golden rule for receiving an inheritance.
The rule is: You must care for and grow the financial capital you’re given in your own way.
What does this mean? It means you have to find a way to grow the goose farm.
What you shouldn’t do is squander the financial capital by spending all of it on items that won’t appreciate in value and grow your capital. Instead, these examples create an excessive risk of loss. For example, avoid:
These examples won’t help you grow your capital. Cars become less valuable the moment they’re driven off the lot, and money spent can’t be gotten back. These examples are akin to cutting the goose open to try to find the golden eggs. You’ll end up without ANY golden eggs.
So, what should you do?
Some of the things you could do with the wealth to build it and invest in your future are:
All of these examples are great money-making activities. For example, if you get a college education, you’ll get a better job that allows you to make more money. Or, if you invest in real estate, you can rent out or sell buildings, again making money. Investing in the family business to add a new location, create a new product, or launch your online store, are other great ways to put your capital to work.
In families who hope to transfer intergenerational wealth, it’s important to teach the upcoming generations how to use the wealth in a smart way. We must teach them not to kill the goose, but to grow the farm and get more geese that lay golden eggs. This way, you can ensure that the family’s wealth will benefit many generations and the community in the future.
What will you do with your inheritance?