How a mom builds generational wealth for her little son
Jernessa Jones, 39, and her son Kyan Blair, 5, upon graduation. Jones graduated with a Masters in Business Administration while Blair graduated from preschool.
Jernessa Jones’ next financial goal is twofold: to buy a home and start building generational wealth for her 5-year-old son, Kyan Blair.
In the past six years she has changed her life and finances. In 2014 she was fired from her job as production manager at Hillshire Brands, pregnant and recently single because she was engaged. It took her about a year to find another job at Safeplace, a domestic violence program in Alabama, and the pay was significantly lower, she said.
During that time, her credit score dropped to around 470 and she went into debt.
“It was survival mode,” said Jones. She found a financial startup – Self Inc. – that she could use to open an account with her creditworthiness and work on building it up while paying off her debt.
The trip also resulted in a career shift. Today Jones is a finance coach at Operation HOPE, a nonprofit financial literacy organization, and recently completed her Masters in Business Administration. She paid off about $ 5,000 in debt and got her credit back on track in the 700s, she said.
Now her focus is on building wealth and passing financial literacy on to her son. She teaches him personal financial basics like saving and wants to invest on his behalf in assets that will grow and pay dividends over time.
“Hopefully he’s well positioned,” Jones said, adding that beyond the resources she wants to give him the knowledge and wisdom to create wealth.
What is generational wealth and why is it important?
Intergenerational wealth is an asset – like a house, savings or investment account – that can be passed on to family members and generally continues to benefit from them over time.
“It is designed to enable individuals to reach their full potential in the future,” said Lauryn Williams, certified financial planner and founder of Worth Winning. For example, family wealth can offer people different opportunities when it comes to education and careers.
Building wealth that can be passed on has been difficult for people of color due to systemic barriers, said Kilolo Kijakazi, an Urban Institute scholar. The professional separation has led to people of color at all levels of education in low-paying jobs with little or no advantages, she said.
In addition, many people of color from financial institutions are without bank details or underserved, which makes growing prosperity difficult.
In 2019, the middle white household had net worth of $ 188,200, nearly eight times more than the middle black household at $ 24,100, according to the consumer finance survey.
This loophole has significantly increased the vulnerability to the effects of the coronavirus pandemic and could be further affected by an uneven economic recovery. This was seen during the Great Recession, when white families’ wealth fell 26.2%, compared with a 47.6% decrease in black families and a 44.3% decrease in Hispanic families, according to the Urban Institute.
“The dollar amount of the racial prosperity gap has widened over the past 60 years and is likely to increase significantly as a result of the coronavirus pandemic,” Kijakazi said, adding that this was partly due to job losses that had a disproportionate impact on workers in the Colour.
“Without income from a job, colored families can run out of savings and go into debt to support themselves,” she said.
Black workers are also more likely to be in jobs where they are exposed to the virus, putting them at higher risk of illness or death. They are also more likely to lack access to employer-sponsored health or retirement plans, which is another barrier to wealth building.
The dollar amount of the racial wealth gap has widened over the past 60 years and is expected to increase significantly as a result of the coronavirus pandemic
Institute scholarship from the Urban Institute
Opportunities to build generational wealth
Still, financial advisors say there are things that individuals can do to prepare to give assets to their families in the future.
The first is promoting financial literacy, like Jones does for her son. “We have so much to do with a narrative that we were told,” said Williams, adding that a big problem for many families is the secrecy of money and finances. “How do you learn about money if you don’t talk about it?”
One thing that can help those who have been underserved by traditional financial institutions is finding a black- or Hispanic-owned bank that is generally better equipped to cope with color communities.
Then Williams recommends starting with the basics of personal finance, such as a budget, to increase the savings when you have the funds. Next, she says it’s important to save in either an employer-sponsored or an individual plan for retirement and make basic long-term investments in the stock market.
Aside from saving, there are other inexpensive measures people can take to make sure they are transferring wealth, Williams said.
Term life insurance, for example, can leave money to the next generation, Williams said.
“Isn’t it worth $ 30 a month to give someone a million off even if you don’t have children?” She said.
In addition, a will, powers of attorney and the naming of beneficiaries on accounts can be of great help. If you die without the proper documents, a probate court will determine how your estate will be divided and cut your total assets so that less is left for your family.
“Little things like this make a big difference,” said Williams.
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Systemic changes are also required
Of course, many of the barriers to financial prosperity that have maintained the racial wealth gap are not the fault of the individual.
“For too long, the misconception has been that these differences are due to poor financial planning or poor financial behavior by the color communities, as opposed to the systemic barriers that really root and perpetuate the racial wealth gap,” Kijakazi said.
Solving the problem will require both policy changes and greater accountability from private financial institutions.