Yahoo Finance 5 [Modern] Ways Gen Z Can Start Building Generational Wealth Now
The age-old notion that owning your home is the ultimate symbol of success is dying, at least for younger generations like Gen Z.
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According to a recent study by Insignia Financial, 71% of Australian Gen Zers find it more important to attain their dream life compared to just 29% who are looking to own their dream home. To add, they are the least likely of any generation to define achieving the “Australian Dream” as home ownership. It’s not much different in the US either.
A recent report by Redfin explained that affordability is the number one barrier to homeownership for younger Americans. About 40% of Gen Zers and Millennials respondents are working side hustles in addition to their 9 to 5 jobs and about 20% are relying on a cash gift from family to successfully purchase a home.
So, is owning a home the best way to achieve financial success these days? Maybe now. Here are some ways that Gen Z can start building generational wealth instead.
1. Increase The Number of Revenue Streams
In addition to your 9 to 5 salary, consider finding other ways to create revenue streams. This can be from a side hustle in your spare time, doing freelance work or even starting your own business. Creating more revenue streams for yourself can create wealth more quickly.
2. Eliminate Debt and Focus On Saving Money
Killing your debt and saving money should be your top two financial priorities to start building generational wealth. Debt eats a hole in your wallet every month, especially high-interest credit card debt. After you kill your debt, saving should be your next focus. It’s best practice to have at least 6 to 9 months’ worth of liquid cash in a high-yield savings account, more if you can. You can also set up automatic deposits from your checking account to your savings account that coincide with your payday. This way, you won’t even feel the difference and you’ll build wealth automatically.
3. Prioritize Financial Literacy
As they say, knowledge is power. It’s crucial to educate yourself about finances as much as you can. Gaining a thorough understanding of things like how interest rates work, the intricacies of the stock market, smart budgeting and how to responsibly use credit cards to your advantage is key. Reading financial books and articles, watching videos, and listening to podcasts from certified financial professionals are some great ways to get started. Increased financial literacy can translate to greater wealth.
4. Always Maximize Retirement Account Contributions
Contributing to your retirement accounts early and often has a major impact on the level of wealth you can achieve once you retire. Thanks to the magic of compound interest, the earlier you start contributing, the longer your money has to grow exponentially until you reach your retirement. Whether it’s a Roth IRA or a 401(k) with an employer match, contributing as much as you can each month is crucial. As a general rule of thumb, it’s best to contribute at least 15% of your annual income toward your retirement accounts.
5. Buy Stocks
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Historically, investing in the stock market has proven to be one of the best ways to grow your money. If you’re just getting started, it’s not a bad idea to invest in low-cost ETFs or index funds. These assets consist of a basket of different investments, which are more diversified (and usually carry less risk) than purchasing shares of individual stocks.
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