Generational Wealth: Understanding it and Breaking Down the Barriers

Key Takeaways:

• Generational wealth is any asset of monetary value that is passed down from one generation to another.
• Barriers exist that prevent underserved communities from building wealth.
• Supporting organizations that work to close the wealth gap can have a lasting impact on families and the economy.?

As a young boy raised in a middle-class neighborhood of Denver, Colorado, my parents worked tirelessly to create a happy and healthy home for my younger brother and me. My mother and father, both teachers, ingrained in us the importance of education. Their guidance gave me the tools and determination to succeed in my studies and throughout my career. Without their support, I wouldn’t be who I am today.

Access to quality education isn’t available to everyone, especially those in underserved communities. Not all families are afforded the same opportunities, and this lack of access to pathways of growth contributes to the wealth gap that persists in the United States.?

What Is Generational Wealth?

Generational wealth refers to any type of asset — cash, property, or business — that is passed down from a prior generation. Imagine you inherited your grandparents’ home that they purchased in the 1950s and were able to sell it at a significantly higher price than they originally paid for it. The profit generated from that sale would be the result of wealth passed down from a previous generation.

Different means of accumulating wealth that can be passed on to future generations includes owning real estate, receiving investments in the stock market, or having a retirement plan.

Barriers to Generational Wealth

Critical barriers exist that prevent people in underserved communities from building generational wealth, including access to affordable housing and education. Today, homeownership is one of the most common means by which a family builds wealth in the United States. In 2022, the U.S. Office of Economic Policy reported a 30-point difference in homeownership rates between white and Black households. The impacts of policies like redlining continue to reverberate throughout the Black community, putting Black families at an extreme disadvantage when it comes to owning their own homes.

Barriers also exist in education. The cost of higher education has skyrocketed, making it difficult for students to obtain higher degrees without incurring substantial debt. According to a 2021 study by the Pew Research Center, students whose parents attended college incurred less debt than first-generation students. Part of the reason for this gap is that second-generation college students tend to come from families with more wealth, who may be better equipped to support their children in paying for college. When examined by race, the percentage of white adults who hold a bachelor’s degree sits at nearly 42%, while only 28% of Black adults hold bachelor’s degrees. This is yet another barrier inhibiting their children’s ability to generate sustainable wealth.?

Helping Underserved Communities Gain Generational Wealth

The wealth gap doesn’t just affect families; it also impacts our economy by reducing diversity in the workforce, specifically in business ownership. A majority of business owners start by using personal wealth or wealth from their families. With barriers in education, savings and homeownership, Black entrepreneurs are less likely to have access to funds to get their businesses off the ground.?

As leaders, we must take it upon ourselves to invest in and uplift our Black communities. Organizations like?Student Freedom Initiative are dedicated to supporting this cause. Student Freedom Initiative is a nonprofit organization dedicated to ensuring freedom in professional and life choices for students attending Minority Serving Institutions (MSIs). Achieving equality in education is one way in which we can begin to close the wealth gap.

Another organization, Southern Communities Initiative, works to support the six southern regions of the U.S. where more than half of the Black community resides. With a mission to accelerate racial equity funding, this organization partners with community leads and companies that want to help break the cycle of generational poverty for these communities.

We are only getting started when it comes to helping underserved communities rise above the barriers that keep them from reaching their full potential. If you want to stay connected to my work in these communities, follow me on LinkedIn for more insights.?