Define what you think of as intergenerational wealth

[sadlebred]

_{The poll got me thinking. No matter if you are a beneficiary of intergenerational wealth or not, how do you define it?}

_{For me, I think it's more of an inheritance situation when a loved one/friend/someone passes and leaves part of their estate to you, parents/loved one help with downpayment of something "real" like a house/land/farm, and paying for an education. Something that is life changing or at least a minor altering of life circumstances (paying off SL, going on a once in a lifetime vacation, etc.)}

_{For example, some have said that having a car provided by parents is intergenerational wealth. I don't think about it that way since 90% of my friends in HS and college from all backgrounds had cars that were either given to them by their parents/a relative or were one of the "family cars" they could drive. (Mass transit was not available where I lived then.) Everyone either drive to HS the Junior and Senior years or rode with a friend/relative that did. For us it was normal. You would not see an upper classman on the school bus unless their car was in the shop. (I rode the bus my first 2 years of HS before I could drive.) Now I see it more as a privilege and not intergenerational wealth.}

_{Just my $.02 for discussion.}

[fortnightlily]

I can't really put a number on it, but I'd consider intergenerational wealth transfers to be any financial help that enables a non-minor family member to do something they wouldn't have been able to afford on their own.

It gets a little fuzzier when we're just talking the gift changing the scale of something. So the couple could've funded a $5k wedding on their own, but with help had a $25k wedding? Sort of counts, sort of doesn't, because without the leg up they would've stuck with what they could afford. Or a 20 year old could've bought a $2k used car but their parents gave them their old sedan with 80k miles on it, meh, but a parent giving Sally a brand new Mercedes for her 18th birthday? Yeah...

[midwestmama]

I think of intergenerational wealth as a large amount of cash with the inheritor/gift receiver would receive, or to pay off a large debt. Maybe the gift of a house (or substantial amount of money to use as a down payment) if the receiver does not already have a home (or they would sell their current home and gain capital from the sale).

My mom has some wealth in terms of property, but property costs money (e.g., taxes) unless you sell it or use it somehow to generate income (e.g., renting). She and her brother rent the farmland they jointly own to a local farmer, and it generates just enough income to cover taxes. My sister will likely get the house my mom received from her dad when he passed away (the house was paid off well before my grandpa got it from his parents), and my sister will likely retire to that house. So she will sell her current house and then will have that $$$ to add to her retirement. If my mom gives me her half of the farm, the only way I will get any sort of $$$ impact in my life is if I ask my mom if her brother would buy her out of his half, or if I ask my cousin who will inherit her dad's half if she would buy me out (I believe she has the money to afford this), or if there is a joint decision to sell the farm and then each person gets half of the amount of the sale.

My mom has one cousin that she is close with, and he doesn't have kids nor is he married (though he has nieces and nephews, but doesn't like any of them), so I'm crossing my fingers and toes that maybe, just maybe, somehow I would get some sort of inheritance from him.

[Susie]

I think it can take a lot of forms.  I can easier give examples than a definition:
 - trusts and bequests of money, investments, real estate, etc.
 - large financial gifts including for house down payment, young adult's student loan payoff, etc.
 - paying for higher education, and especially paying for graduate/professional school 
 - saving in a 529 for a child, and if the child doesn't use it, rolling it over into a Roth IRA for the adult child

There are also educational/lifestyle aspects.  
 - teaching kids about opening a Roth IRA as a teenager.  Maybe the teen is earning all the $ that goes into the Roth, but the know-how to do it is an undervalued asset.  It might also be the more traditional kind of transfer (above) if the parents helped with some of the funds, enabling the child to keep some of their earned cash, but maxing what they can put into the Roth (i.e. up to the max of what they earn).
 - teaching kids financial literacy, 101 level, then 201 level, etc.  Speaking the language of investing and other financial products.  Modeling good financial practices, etc.

A few people have mentioned paying for weddings in the other thread about intergenerational wealth transfers.  I think it's lovely when parents do, but I don't consider that an intergenerational wealth transfer because it's transient.  It pays for a fun day and then the day ends, probably with expensive photos and videos to remember it.  It isn't transformative in any way with respect to the recipient/"transferee"'s financial situation.

[sicilygirl]

When I think of generational wealth, I think of trust funds and not ever having to work. I wouldn’t personally consider parents that pay for college or help with a modest down payment, etc. to fall into that category.

For things like college/down payment, it’s certainly still a privilege to the recipient and gives them a massive leg up in the world. But I put it in a different category.

I think it’s the specific use of the word “wealth” for me. Like, I’m personally wealthy compared to most of the world and even most of the United States, but if H and I quit working tomorrow, it would only take a few short years for us to be completely bankrupt by just continuing to pay our usual monthly expenses. That’s much different to me than someone who could live forever (even a modest lifestyle) off of their wealth.

[awkwardpenguin]

I read a book in college called "being Black, living in the red" that completely changed my perspective on this. It traces how the legacy of being unable to own property until fairly recently has persistently depressed the wealth of Black families over generations. The amounts of wealth we're talking about are generally small - help with educational expenses or a car down payment, not many thousands of dollars in inherited money. But those little legs up that come from the ability to accumulate wealth (especially via homeownership) and borrow against home equity create a persistent gap in the levels of wealth subsequent generations are able to achieve.

I definitely benefited from small intergenerational transfers of wealth from my grandparents to my parents and from my parents to me. My parents ability to access credit also allowed them to help pay for my college when they didn't have the cash flow to do so.

[tacokick]

I do think of generational wealth mainly as down payments/rent/paying tuition/inheritances/trust funds but I do think that paying for car or having a car to give your children and upgrade yourself and giving significant money for something that is a one day party like a wedding is a signifier for other financial advantages. I don’t know anyone who got a car in high school or a lot of money for a wedding that didn’t also have college paid for or their rent or something else major by a family member.

I went to a school where we were all basically working class and below. We were not on a public transit line. The only kids with cars were ones who took auto shop at the vo-tech half day, some work study kids and one kid who had four siblings at the school. We walked miles to the public bus to go downtown, to each other’s houses if we couldn’t get a ride from a parent, we rode the yellow bus or walked if we were under 2 miles to school. Many parents had no car themselves. Their parents not only weren’t paying for college, they weren’t co-signing loans for college or taking out “parent loans” because they knew couldn’t pay them back or qualify in the first place. Kids were working to help their parents, not the other way around.

My parents were debt free, savers and very frugal but had a low income. My mom drove our family (old, high mileage) car and my dad walked 3 miles to the light rail to go to work across town. There was no car to give and they weren’t going into debt to get a newer car for themselves so I could drive to school.

Having things like a car also increases your access to other legs up like internships and jobs that aren’t on your bus route or in walking distance. Maybe you could go to college and know you can drive yourself home at breaks. Get yourself to the library that’s open on Sunday. Join some team that doesn’t provide a bus.

Maybe it isn’t technically generational wealth and just privilege but it’s not nothing.

[mommin]

Generally, I would say anything that is financially beneficial after age 18/high school graduation such as paying for college, help with down payments, living with family rent-free, inheritance, etc. However, I think there are definitely some things that benefit kids/teens that involve money and transfer from one generation to another. Off the top of my head, paying for private primary or secondary school, expensive tutors or coaches to help get in to college, or a teen being given their own reliable vehicle.

Some of these might be a very small financial boost but it is still a boost from the parents or grandparents finances helping a younger generation.

[jinkies]

I'm in a weird situation because we grew up with very little money (like no health insurance, don't turn on the heat, no vacations, hand me downs only lifestyle) but my family had been farming the same land for a few generations.

When I was in high school, they were able to sell the rights to develop the land to the township through a program designed to preserve open space. So they had a one-time influx of money just in time to pay for the bulk of my college.

But because of the way I grew up and even how my parents live now, it's hard for me to think of them as wealthy even while I recognize it was a huge privilege for me to be able to graduate college debt free due to a unique circumstance.

I tend to think of generational wealth as being handed a trust fund or a house or an extremely profitable business. But I also know that someone with decades of student loans is probably reading this and thinking "bitch please, you got free college".

In summary, I don't know.

[heygrey]

Does the current cost of living/our reality as adults sway our thinking?

My grandfather financed my parents first house - a decrepit trailer on 3 acres for $10,000. They were young and didn't qualify for a mortgage, but my grandfather had recently been in a serious car accident and received a settlement that allowed him to purchase the property outright. They paid him back, fixed up the trailer, and eventually (20 years later) built a house. This gave them housing security through some difficult years of un/under-employment and allowed them to start building equity in their early 20s.

Housing prices, even in my parents LCOL, have risen so much that they could never purchase a house outright for my family. They are incredibly generous and often give H, DS, and I more than I think they should, but the ability to give "life-changing" gifts like acting as a financier for a family member's mortgage is not possible.

[heygrey]

Feb 3, 2024 10:48:40 GMT -5 jinkies said:

I'm in a weird situation because we grew up with very little money (like no health insurance, don't turn on the heat, no vacations, hand me downs only lifestyle) but my family had been farming the same land for a few generations.

I am still angry with a teacher I had in middle school. We were doing a science lesson on heat sources and they asked the class how we heat our houses. In my house we kept the furnace as low as we possibly could, but when it was really cold my mom would bake so we had the additional heat from the oven. "Furnace" had already been given as an answer so I raised my hand and said "we bake cookies so the oven heats the house". The teacher scoffed at me (actually scoffed!) and said "you don't heat a house with an oven." 

Bitch please. When you live in a small trailer, a warm oven actually does a lot of good for the main living area. 

[jinkies]

heygrey I could do a whole thread on how uncomfortable it is to live in a middle/upper middle class world when you come from a very different background. The wild things that people have said to me....

I'm sorry your teacher was so insensitive. We had a single kerosene heater in the kitchen and otherwise just bundled up. The house was wired for electric heat but we all understood it was too expensive to turn on.

Back to the question of the thread though, I missed awkwardpenguin's post the first time. I am absolutely an example of the "little things" adding up to be life changing a few generations down the line. And I do understand that. I initially saw that as different than intergenerational wealth because I think of Rockefellers and Kennedys when I hear "intergenerational wealth", but maybe it's the same thing just a different scale.

[litebright]

When I think of intergenerational wealth, I think about when I got in a car accident as a young 20-something and totaled the car that my parents had bought for me when I was in college. I had just purchased my first set of new tires for that car less than a month before. I drove a TON for work as a young reporter and was driving for work at the time of the accident.

My parents had another used car (same model, different color) that they had purchased around the same time that they bought my car, and they gave it to me. In a different family situation, the sudden loss of a car would have meant that I had NO transportation, then I would have lost my job, then lost my housing, then had to move home.

To me, that was intergenerational wealth, because my parents' financial situation made a difference in my life trajectory: that my parents had an entire spare used CAR that they could give to me to replace the car that they had bought for me. And they didn't think twice about doing it.

[red]

I consider intergenerational wealth being able to set your children up for success through the big life stages. Private grade school, college tuition, funding weddings, providing a down payment towards a house or gifting a family home, and leaving an inheritance when you pass. There is also an extreme benefit to having a great family support system and connections.

I grew up below the poverty line in a rural area and I did not think intergenerational wealth was common. My husband came to the United States as a teenager as a refugee with his family. We paid for our cars, college, wedding, 3 IVF cycles, and down payments. When you are the only ones in your extended families to “make it,” you do not get help, you are giving it instead. You are picking up the checks for dinner, hosting the holidays, and helping parents with bills. When your parents pass you are paying for funerals and there is no inheritance.

We moved out of state to an affluent area and I realize just how different it is to start ahead and continually have a safety net. Comparison is the thief of joy though, we have more than we ever expected to.

[lust2hart]

Feb 2, 2024 16:22:07 GMT -5 Susie said:

A few people have mentioned paying for weddings in the other thread about intergenerational wealth transfers.  I think it's lovely when parents do, but I don't consider that an intergenerational wealth transfer because it's transient.  It pays for a fun day and then the day ends, probably with expensive photos and videos to remember it.  It isn't transformative in any way with respect to the recipient/"transferee"'s financial situation.

I agree with this. I think an act of inter generational wealth is one that has “staying power.” One could argue that parents paying for the wedding helps their kids stay out of debt, but I think that is too abstract to really count.

[aprilsails]

Intergenerational wealth to me is when the grandparents pass and the parents have enough money that they don't need the inheritance and just pass it straight on down to their kids. It also has to be above $10,000 in value. Below that, and it will not make a significant difference in improving someone's life.

This definition is just what I have in my mind. I remember reading an article about a family with significant generational wealth and their policy was strict that your wealth skips a generation and goes to the grandkids as a trust fund with limited access only at certain prescribed intervals. In this way they have guaranteed that their money continues to grow from generation to generation and no one bad actor can screw over their kids because the investment returns are guaranteed over a 50 year window.

[wildrice]

I've always thought of it as a life changing amount of money being transferred from one generation to another. I guess I've never thought of paying for undergraduate education as being a generational wealth transfer, but perhaps that's because there is privilege in having had that as part of my own experience. To further explain, my parents were not wealthy when I was growing up and were always very frugal when it came to most things, but as a result they did manage to put away enough to pay for a good part of my undergraduate education (granted, at a state school where I had scholarships). This did mean I graduated with less debt that many others, but I have never thought of it as "wealth" since I still had sizeable student loans from grad school (and a bit from undergrad as well) and still basically started out my adulthood struggling financially for a number of years. I probably would have been a bit worse off if they hadn't contributed, but we're probably talking paying $450-500 a month in loan payments instead of the $350 I paid, so IDK if that truly was "life changing" or just helpful? I don't mean that to minimize what my parents did - I am very grateful - but it was a result of their sacrifice vs what I would usually think of as wealth transfer. That money wasn't because they had surplus wealth, but because they specifically chose to go without things that would have made their lives easier/more pleasant had they not been saving for college instead.

However, there are many families without the ability to save anything for college, so the fact that we weren't going hungry to save for college IS a marker of wealth - just not in the way I've always thought of wealth!

I also think the absence of having to put out money to pay for older relatives is a form of wealth. I don't expect to inherit much, if anything, when family passes away, but I also don't expect to have to put aside my money to help them out. My parents only have 1 living parent between them, and they haven't ever paid for support for their parents nor will they. Again, it doesn't result in anything tangible to increase their wealth, but allows us all to use our own money on ourselves so puts us in a better position overall.

[red]

wildrice- the college thing is interesting, because some people with money do not save it and cannot help their kids with college or any of the other things mentioned. For me, I knew my parents would give $0 towards my education and life going forward, so a lot of my decisions were made with that in mind. I went to a community college on scholarships and financial aid and I guess that is the only time being poor paid off (lol) since financial aid actually gave me a meager amount of money back every semester (like $1k but I felt rich haha). If I had gone to a state school or private university (where I also had scholarships as well), no doubt I would have had significant debt to overcome still. After my associate degree I was able to work while obtaining my bachelor and master degrees, my employers paid for those. If I had parents willing to help I certainly would have preferred to get my undergrad completed all at once without working full time. I also never had a true college experience because I lived at home for community college and then did online degrees. Sad I missed out on some of that, but I knew I could not afford it.

[wildrice]

red, being able to go to school full time with family support is definitely a privilege that is not afforded to many! And that's a good point that some people with the ability to save more for their kids' college don't, so that also brings up some interesting thoughts about what constitutes wealth vs income. Two families making the exact same income might choose to spend or save it very differently. I feel like the ability to provide your kids with some of these things - without it being a big windfall - should have another name, maybe?

[flygirl]

I agree with awkwardpenguin, Anything that you received that help you stay out of the red and start building wealth/have a better/easier life is a transfer. The vast majority of my family/Hs family live paycheck to paycheck and simply letting adult kids live at home for a bit even though there are 5 people too many already can help them get a better start sometimes. Getting a car or college paid for might be normal in some circles but not for the vast majority so you’re benefiting from the wealth your parents/grandparents have.

[gt7301b]

There is a key component of inter-generational wealth that may not show up on a balance sheet but has the ability to significantly alter ones life trajectory. My parents divorced when I was little and we moved in with my grandparents. My grandparents ended up selling their house and buying a house with a cottage so we could live there. That enabled my mom and I to live separately in the cottage but also close enough that my grandparents could help significantly with the child care while my mom was a single mom. My mom was still in college at that point and that help allowed her to complete her degree. She probably would have had to drop out or stay in an bad marriage if it wasn't for the assistance that they provided.

[fortnightlily]

Feb 7, 2024 10:30:15 GMT -5 gt7301b said:

There is a key component of inter-generational wealth that may not show up on a balance sheet but has the ability to significantly alter ones life trajectory. My parents divorced when I was little and we moved in with my grandparents. My grandparents ended up selling their house and buying a house with a cottage so we could live there. That enabled my mom and I to live separately in the cottage but also close enough that my grandparents could help significantly with the child care while my mom was a single mom. My mom was still in college at that point and that help allowed her to complete her degree. She probably would have had to drop out or stay in an bad marriage if it wasn't for the assistance that they provided.

I feel like in many cases though you'd probably find a weak or even inverse correlation between things like multigenerational living and relying on family for free childcare and actual wealth accumulation/class mobility. 

[noodleoo]

It has been eye opening as an adult to find out how much financial help people we know have gotten from their parents. I used to wonder how friends bought their giant houses or are putting huge additions on them. A surprising number got significant money from their parents for these things (like $50K to over $100K). But aside from that, many friends also get other big things paid for, like $10K trip to Disney every year or $20K to fix their deck. H used to always think that we were poor (even though we make a good income!) because our friends seemed to be spending a lot more money than we can. As we've gotten older, people are more open about talking about money and I've realized that a lot of it comes from their parents and it is just normal to them to either ask for or be given big sums of money. Our parents are both immigrants so it is not normal for us.

I do think free childcare is a huge gift. Part time daycare for 2 kids was more than our mortgage. Grandparents who provide free childcare are easily saving their kids $100K+. (And ouch, that just prompted me to calculate how much we will pay in total for daycare for our kids and WOW I never did that math before and it HURTS).

While that may not be intergenerational wealth by strict definition, it is a huge financial advantage.

[dochas]

It means that previous generation(s) has so much money you're always going to have money too.

[ellipses84]

I’d say any money or assets that benefit a person beyond 18, especially 5-6 figures and above, including money for a wedding. Even small gifts and loans make a huge difference.

Granted we didn’t have a lot of money but my parents were very much of the mindset that you are on your own when you’re 18. I worked jobs like babysitting or doing yardwork/ housework for my grandparents from the time I was 12 and paid all my own expenses from that point forward except for rent and food. They loaned me $1000 for my first car with the expectation I could drive myself to school since we’d moved further away right before that, and I’d get a real job to pay them back, pay my own insurance and gas. I didn’t have a car for most of college and Sr year they loaned me a $2000 car so I could get to and from my internship because there were no easy bus routes to get there. At graduation they gifted me the car which is the single largest gift they ever gave me, by far. They didn’t contribute any significant amount to my wedding.