I hear the term “generational wealth” from time to time, and I have even written about just how difficult it is to maintain wealth in a family long-term. Yet I hear this frequently listed as a goal (not a SMART goal, but a goal nonetheless). The gist of it comes from ideas like this quote from Robert Kiyosaki:
I hate the quote. It serves a good purpose in that it focuses you on wealth rather than income as the definition of rich. But I hate that it extends “the game” into eternity. Now, the game cannot be won. You cannot have “enough” because now you need enough for an interminable number of generations beyond yours, and as I wrote before, thats impossible.
There isnt even an agreed-upon definition of how much it takes to have generational wealth. I mean, generational wealth is just a fancy phrase that we used to call an inheritance. If you leave $1,000 to your kids, theyve technically got generational wealth! However, I think the general idea here is that you are leaving a large enough inheritance to have a meaningful impact on their life. Thats not $1,000. Unless youre leaving it to them at a young age, it probably isnt even $100,000. Were talking about leaving a seven-figure amount.
Schwab did a survey asking people to define “wealthy.” They came up with a net worth of $2.2 million. So, I guess if you leave your heirs $2.2 million a piece, youve done the generational wealth thing.
The only hard definition in estate planning is the estate tax exemption. In 2024, that amount is $13.61 million ($27.22 million married). Of course, that gets split up between heirs. If it all went to one heir, thats a whole lot more money than if it is split between five or 10. But if you have an estate tax problem, you can consider yourself to have created generational wealth. I think most white coat investors would agree that most doctors can retire happily, successfully, and indefinitely on $5 million. If youre leaving $5 million to heirs, youve left them enough that they can not only do (in the words of Warren Buffett) anything they want, but nothing at all if they so please. Im not saying that people cant spend more than the amount $5 million will provide long-term. Thats not enough wealth to afford a NetJets subscription, for instance. But its still a big old chunk of money and almost twice my original retirement nest egg goal—at least before adjustment for inflation.
Habits, knowledge, education, and lifestyle are also passed down. Its not just about the financial assets. Obviously, most of us want to leave our kids as much knowledge, education, and good habits as we can. Thats not exactly a “rich person” thing.
Ever wondered how rich you need to be to create wealth that lasts for generations? I’ve spent weeks researching this question, and what I discovered might surprise you. Turns out, the amount needed for generational wealth could actually be lower than what most Americans think they need just to feel “rich” in today’s world.
Let’s dive into what really constitutes generational wealth the numbers experts throw around and how you can start building your own family legacy – regardless of your current bank balance.
What Exactly Is Generational Wealth?
Before we talk numbers we need to get clear on what generational wealth actually means. It’s not just about being rich for a hot minute.
Generational wealth is wealth that’s passed down from one generation to the next, It includes
- Financial assets (cash, investments, property)
- Non-financial assets (education, skills, networks)
- Family businesses
- Real estate holdings
- Investment portfolios
The key difference between being “rich” and having “generational wealth” is longevity and purpose. Generational wealth is intentionally built to last and benefit multiple generations of your family, not just fund a luxury lifestyle today.
As the AccountingInsights team puts it, generational wealth “focuses on establishing resources and opportunities that can be passed down, providing a lasting legacy.” It’s about creating financial security that extends beyond your own lifetime.
The Magic Number: How Much Is Enough?
So what’s the dollar amount needed for true generational wealth? Well, it depends who you ask.
According to the Federal Reserve’s Survey of Consumer Finances, the average value of generational wealth transfers comes to about $350 billion per year. In a typical year, approximately 2 million households receive either inheritances or sizeable gifts.
But when we talk about specific figures, there are several different benchmarks:
The $1.5 Million Per Child Threshold
James McCarthy, an advisor with Nicola Wealth in Vancouver, suggests that generational wealth starts when an estate can provide at least $1.5 million per child. This amount might not fund an extravagant lifestyle forever, but it can provide a meaningful financial foundation.
The $5 Million Rule
Wealth Factory proposes that $5 million in net worth can be sufficient to provide financial stability across generations. When diversified across real estate, investments, and cash, this amount can sustain wealth over time—assuming future generations manage it wisely.
The $10 Million Benchmark
Financial Samurai sets the bar higher, suggesting $10 million as the baseline for true generational wealth. Why? Because this amount can generate $300,000 to $500,000 in annual income (using a 3-5% withdrawal rate) without depleting the principal. This passive income stream creates financial resilience, reducing each generation’s reliance on earned income.
The Ultra-Wealthy Standard: $13.99 Million+
Some argue that generational wealth begins where estate taxes apply. In 2025, the estate tax exemption is $13.99 million for individuals and $27.98 million for couples. This perspective defines generational wealth as having enough assets to worry about estate tax planning.
What Americans Actually Think vs. Reality
Here’s where things get interesting. According to Charles Schwab’s 2024 Modern Wealth Survey, Americans believe it takes about $2.5 million to be considered wealthy. This figure has increased from $2.2 million in 2022 and 2023, likely due to inflation and rising living costs.
The generational breakdown shows different expectations:
- Boomers set the highest bar at $2.8 million
- Gen X comes in at $2.7 million
- Millennials and Gen Z believe the threshold is lower, though still in the millions
But here’s the twist – the amount needed for generational wealth might actually be less than what Americans think they need just to feel “rich”!
According to a Charles Schwab survey on generational wealth, the average wealthy American expects to pass down $4.1 million in assets, allocated as:
- 40% in real estate ($1.6 million)
- 31% in investments ($1.3 million)
- 18% in cash ($740,000)
- 11% from life insurance proceeds ($440,000)
For ultra-high-net-worth individuals (those with $10+ million in investable assets), the number jumps to $11.9 million.
The Short Answer: It’s Not Just About a Number
If you’re looking for a specific number like “$10 million,” you might be disappointed. The truth is, there’s no one-size-fits-all answer.
As AccountingInsights explains, “determining a precise monetary threshold for what constitutes generational wealth is complex, as there is no single, universally agreed-upon figure. The amount considered ‘enough’ can vary significantly based on a family’s specific financial goals, their cost of living, and their geographic location.”
The short answer: Generational wealth is achieved when you’ve accumulated enough investments to pay for your family’s living expenses in perpetuity without touching the principal. That number will be different for everyone.
Beyond the Dollar Amount: What Really Makes Wealth Last
Here’s something shocking – about 70% of wealthy families lose their wealth by the second generation, with 90% losing it by the third generation! This phenomenon is so common it’s called the “third-generation rule.”
So clearly, building generational wealth isn’t just about reaching a certain dollar amount. It’s also about:
- Financial literacy – Teaching your kids and grandkids how to manage money wisely
- Estate planning – Using the right legal tools to protect and transfer wealth
- Asset diversification – Not putting all your eggs in one basket
- Family governance – Creating systems for making decisions about shared wealth
- Values and communication – Discussing money openly and instilling solid values
How to Build Your Own Generational Wealth (Even If You’re Starting Small)
Contrary to what many believe, you don’t need to be born into money to create generational wealth. Here are proven strategies to start building your legacy:
1. Invest Early and Consistently
The power of compounding is your greatest ally. Even modest investments in a diversified portfolio of stocks, bonds, and funds can grow substantially over decades.
2. Buy and Hold Real Estate
Real estate is a cornerstone of generational wealth for many families. Beyond your primary residence, investment properties can provide:
- Consistent cash flow through rental income
- Long-term appreciation
- Inflation protection
- Tax advantages
- A tangible asset to pass down
As one source notes, “owning a home of any kind can be considered generational wealth if you keep it within the family.”
3. Start or Invest in Businesses
Business ownership offers another powerful avenue for creating substantial equity and recurring revenue streams. A successful business can provide consistent income for current and future generations.
4. Manage Debt Wisely
Minimize high-interest consumer debt and leverage “good” debt strategically. For example, a mortgage on an appreciating asset can help build equity and wealth over time.
5. Set Up the Right Legal Structures
Estate planning is crucial for preserving wealth across generations. Consider:
- Wills and powers of attorney
- Trusts (revocable or irrevocable)
- Strategic gifting (up to $19,000 annually tax-free per recipient in 2025)
- Life insurance policies
6. Invest in Education
Both financial education for your family members and formal education that increases earning potential are investments in your family’s future wealth.
My Take: Start Where You Are
We’ve got this idea that generational wealth is only for the super-rich. That’s simply not true. Whether you have $50,000 or $5 million, you can begin building a financial legacy today.
I believe the most important step is just getting started. Even if you can only invest small amounts now, those investments – combined with education and intentional planning – can grow into significant wealth over time.
Remember, most American millionaires are self-made, not trust fund babies. Only 21% of millionaires received any inheritance at all, and just 16% inherited more than $100,000.
The Bottom Line
Generational wealth isn’t defined by a single magic number. It’s about creating a sustainable financial foundation that can support your family for multiple generations.
Whether that means $1.5 million per child, $5 million total, or $10+ million depends on your family’s specific circumstances, goals, and lifestyle. What matters most is not the starting amount but the strategies you use to grow, protect, and eventually transfer that wealth.
The journey to generational wealth starts with a single step – making the decision to build not just for yourself, but for those who will come after you. And that decision? You can make it today, regardless of your current net worth.
What steps are you taking to build wealth for future generations? I’d love to hear your thoughts and strategies in the comments below!
How to Build Generational Wealth
If you really want to build generational wealth, youre going to have to do things a little differently. Were not talking about basic “doctor rich” here. Doctor rich is making $300,000 a year, saving 20% of it, working a full career, retiring with $5 million or $6 million, living off it in retirement, and leaving behind $6 million or $8 million split between three or four heirs. Thats what most of us will do, and its nice. Its a great financial life, and your heirs will appreciate it. But the life of your heirs probably wont be all that different from yours, and chances are that very little of the wealth you pass on to them will make it to the next generation. Studies suggest that only 30% of wealth inherited by the second generation makes it to the third generation, and only 10% makes it to the fourth generation.
Youre going to need more money to do this. How do you get more money? You take the basic formula for getting rich and expand on every sector of it. Heres the basic formula.
- Make a lot of money ($300,000?)
- Dont spend a lot of money ($175,000?)
- Invest the difference in a reasonable way (stock and bond index funds?)
- Dont lose your money to death, disability, liability, fraud, speculation, burnout, etc.
How do you expand on that if you want $20 million-$100 million instead of $5 million-$10 million?
- Make even more money ($1.5 million-$2 million+?)
- Invest a huge chunk of it ($1 million+ a year)
- Invest at least some of your money into small businesses you control (that hopefully become large businesses) and leveraged investment real estate.
- Dont lose your money to the usual issues (as well as estate taxes) by doing estate planning early and getting those rapidly appreciating assets out of the estate and into trusts
More information here:
Do You Even Want to Leave Generational Wealth?
Perhaps the biggest ethical dilemma is whether you even want to leave that sort of an inheritance behind. You can ruin someones life by leaving them too much money in the wrong manner at the wrong time. Giving is hard. Giving is work. Doing it wrong has consequences. For example, we now have an adult child. If we were to be hit by a bus tomorrow, she would not come into her share of the inheritance for many decades. Too much potential to ruin her life to leave all of that at once to a 19-year-old. There are better ways to do it and that usually means some kind of a trust. You always have an outlet, too. You dont have to leave it to heirs; you can always leave it to charity.
How to Build Generational Wealth (IMPORTANT)
FAQ
What is generational wealth?
The short answer; Generational wealth is achieved when you’ve accumulated enough investments to pay for your families living expenses in perpetuity without touching the principal. If you’re looking for a specific number like “$10 million,” you are going to be disappointed. How many generations are considered old money?
Do you need to be wealthy to pass down generational wealth?
You don’t need to be wealthy to pass down generational wealth, as the term refers to any assets, property, money or investments that you can pass down to your children or other family members. Therefore, owning a home of any kind can be considered generational wealth if you keep it within the family.
How do you build generational wealth?
Generational wealth can take many forms, but it is often built through investing in stocks and bonds, owning real estate, starting a business, or a combination of all of those. Smart estate planning can also help make sure that generational wealth isn’t diminished through taxes that would otherwise be avoidable.
Do wealthy families lose their wealth by the second generation?
It can be easy to assume that a wealthy family has always been wealthy and will always be wealthy. But the truth is, around 70 percent of wealthy families lose their wealth by the second generation. What is the 3rd generation rule?
Do wealthy families lose their legacy by the third generation?
Most wealthy families lose their legacy by the third generation—because they never talk about money or prepare the next generation. To build lasting wealth, start with a strong foundation: get out of debt, save an emergency fund, invest 15%, pay off your house early, and teach your kids about money.
Is grandparental wealth a predictor of grandchildren’s wealth?
It also found that grandparental wealth is a specific predictor of grandchildren’s wealth, beyond the role of parental wealth. The study also indicated most of the advantages coming from family wealth begin before any inheritance, ranging from gifts to education, homeownership and business ownership.
How many millions is considered generational wealth?
The $10 Million Mark
According to Financial Samurai, $10 million is the baseline for true generational wealth.
At what net worth are you considered wealthy?
Is $50 million generational wealth?
How many generations of wealth does it take to be old money?
