And how to avoid them.
By: Aditi Agarwal & Moksha Karuturi
Creating generational wealth can be extremely difficult, with around 70% of wealth accumulated by the first generation disappearing by the second generation, and 90% by the third. However, generational wealth is an important tool for a stable financial life, especially for immigrants as they settle their lives in a new country and create strong foundations.
Within this post, you can learn about common pitfalls in creating generational wealth, and what you can do to avoid these!
Roadblock #1 - The Sandwich Experience
The sandwich experience is a common scenario in which first generation immigrants are responsible for supporting their immediate family as well as their family abroad, often through remittances (sending monetary support). This creates a unique situation, in which first gens must create savings for future investments while having a portion of their income sent overseas, making it difficult to accumulate a steady flow of savings, and causing a cycle of debt.
How this can be avoided: Create boundaries regarding the amount of money sent overseas, such as a specific percentage of income that will be set aside for this. This will allow continued support of family overseas, and a uniform savings plan.
Roadblock #2 - Cultural Stigma
Many cultures, such as my own, often have a stigma surrounding discussions of money and finances, which leads to confusion around the handling of funds and low rates of financial literacy within future generations. Although discussing money can be uncomfortable, it is essential to teach family members how to handle assets, and the financial values that you wish to pass on in order to raise educated and prepared individuals that can continue building generational wealth.
How this could avoided: Educate yourself through financial lessons. If you have a strong and clear understanding of personal finance, it is easier to teach to your family. Browsing online resources such as those available on the resources page of our website can help create confidence and boost understanding. Be sure to start small and ask for help when needed!
Roadblock #3 - Discrimination/Legal Status
BIPOC employees are statistically underpaid in comparison to their white peers, as well as facing discrimination surrounding skin color, accents and more. A study by UCLA in 2021 discovered that 65% of the surveyed 2000 immigrants felt they would be prevented from citizenship if they used government benefits such as housing and food aid programs. Through these factors, it is more difficult for immigrants to adjust to American workplaces and continue their journey in saving and investing.
How this can be avoided: Racism and discrimination is never, and will never be okay. It is not the responsibility of the victim to deal with these issues, rather the job of the community as a whole to step up and change mindsets surrounding immigration. For support, please visit local immigration aid committees, such as: https://www.immigrationadvocates.org/
YOU CAN DO IT!
Sources -
Grover, Monica. “Wealth and Opportunity Divides Haunt Immigrant Families for Generations " NCRC.” NCRC, 9 May 2022, https://ncrc.org/114382-2/.
N'Jie-Konte, Anna. “A Financial Planner Shares 3 Ways First-Generation Americans Can Build Wealth for the Future While Supporting Families Who Need Them Now.” Business Insider, 30 Oct. 2020, https://www.businessinsider.in/international/news/a-financial-planner-shares-3-ways-first-generation-americans-can-build-wealth-for-the-future-while-supporting-families-who-need-them-now/articleshow/78958107.cms.
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