Family Investing | Growing Your Assets for the Next Generation

Family Investing Intro Image

Along with maintaining the health and well-being of the ones you love, you’ll consider their financial security at some point. Family investing is simply strategic planning to ensure financial peace of mind for generations.

Having a family is a big commitment. As you age and your household grows, more and more people could fall under your umbrella of responsibility.

There are a few key things to remember when planning for your family’s financial future. This article looks at various wealth management strategies, from couples just starting out to multi-generation extended family groups.

Thinking Long Term is The Key

When planning for your family’s financial future, focus on long-term investing while minimizing risk. That’s old news for experienced investors, but it’s essential to know for those just beginning their investing journey.

Family investing isn’t about scoring fast with a random meme stock. It’s about growing and protecting wealth to take care of yourself and your spouse in retirement, supporting your children as they begin their own lives, and protecting the wealth of your extended family.

Suitable long-term investments include:

  • Certificates of deposit (CDs) are one of the safest investments available. Usually bought directly from banks, CDs provide moderate but guaranteed rates of return.
  • Bonds are another safe long-term investment, though interest rates will vary based on how much risk you’re willing to accept. Government bonds are the safest.
  • Mutual funds are perfect because much of the work is done for you. Professionals manage the fund and grow your money – for a fee.
  • Exchange-traded funds (ETFs) are like mutual funds that can be bought and sold like stocks. You get most of the benefits of a mutual fund without the additional fees.
  • Dividend stocks can be an excellent long-term investment if chosen carefully, providing cash returns from mature companies with little chance of collapse.
  • Real estate is great because it delivers the dual benefits of living space and valuable portfolio assets. Rental income can be a stable source of cash, too.

Family Investing as a Couple

Investing as a couple is similar to investing by yourself. While combining finances isn’t necessary, it does make planning for retirement more manageable and increases your buying power.

Risk Management

You must compromise with your spouse about when you plan to retire and how much risk you can take to achieve that target. Even if you have different retirement targets, you will be affected by each other’s decisions.

Optimize Retirement

Make sure your IRAs and 401(k) accounts get maxed out and that you’re receiving any matching funds offered by employers – it’s free money. If one partner isn’t working, consider opening a spousal IRA for additional tax-deferred savings.

Real Estate Options

Your combined buying power gives you access to better financing terms and conditions for real estate investment, which has both long-term wealth potential and practical value.

Family Investing with Children

While your overall long-term investment strategy should remain the same, children present a few factors that require adjustments to your approach.

Less to Invest

Children are expensive, and that means budgeting is even more critical. The arrival of a child means more day-to-day expenses and less capital available for investment. Compounding interest is your friend here, but it takes time.

College Savings Plan

You can help prepare for your child’s education costs by contributing to a 529 college savings account, which provides tax-free growth and tax-free distribution if used for educational purposes. That can go a long way to help your child avoid crushing college debt.

Family Trust

A family trust is like a will but with a more robust legal framework. When you have developed a large amount of wealth and assets, it’s essential to establish a family trust to make sure your wishes get carried out appropriately.

Family Investment Company

If your investments – and your family – get big enough, it might be a good idea to start a family investment LLC. This separate legal structure can help reduce the bickering and backstabbing that often affects wealthy, multi-generational extended families.

Official Management

Official management and legal oversight are vital benefits of setting up a family company. Investments are transparent, and management can be held accountable. The family can also vote on leadership, risk tolerance, investment types, and operating agreements.

Buying Power

By pooling family resources, everyone gains more buying power – like a miniature mutual fund. A family LLC with significant resources can gain access to higher-quality investment classes, all while maintaining accountability for individual investments.

Tax Savings

By transferring assets into the LLC, then to other family members, you can save on taxes and other fees. You can also set up your LLC in another state (e.g., Wyoming or Delaware) that provides more advantageous tax rules. 

How to Get the Family on Board

Before you can start investing for your family, they have to believe it’s a good idea. Here are some things to keep in mind.

Investment Education

First, you need to make sure you know what you’re talking about. The members of your family are more likely to get behind you if they feel like you know your stuff – and rightfully so! Fortunately, there is almost limitless high-quality investment education available. Get to studying and share what you learn with them.

Explain Your Goals

Next, help your family understand the end goal. It is not some get-rich-quick scheme. A long-term investment strategy with minimal risk is a proven way to develop wealth over time. When your family understands this goal, they will be more likely to support your investment strategy.

Show Success Stories

Presenting past success stories is the best way to make a case for investment. Many investment concepts could be more intuitive, so case studies and graphs can help demonstrate the benefits of a long-term investment strategy. 

Lead by Example

Before asking your spouse to combine investments or asking family members to join an LLC, you should have a track record of success. Of course, the real value doesn’t reveal itself in the short term. Still, a disciplined commitment to a long-term strategy can show you’re serious and not looking to play the market like a casino.

Don’t Force It

For whatever reason, people may resist joining in with your family investment goals. And that’s fine. A hard sell is more likely to generate distrust than support. Just continue with your strategy and let your results speak for you.

Investment Tracking

Whether you are just married or the leader of an extended clan, it’s essential to have a trusted way to track your investments. Our Stock Market Eye software provides real-time market data to help you keep track of your family’s investments and secure your financial future.

Start Planning for Your Family’s Future Today

We hope you have a better idea about how having a family can affect your investing strategy. Whether you’re a newlywed couple or part of a large extended family, you can benefit financially by finding ways to work together.

Back to top