The 4 Types of Capital For A Generational Wealth Family

Table of Contents

Dynasty Capital that Matters Thumbnail

Whether you have $10 dollars or $10 Million, it is completely possible for you to build your own form of generational wealth (old money) and a dynasty through prudent practices and intentional living.

This is because generational wealth is about more than the money. In fact, there are 4 types of capital necessary to build generational wealth, and money(financial capital) is the least of them.

These are the 4 sources of capital which all great people and legacy families build and draw upon to give them a unique advantage. It fuels them to grow as people and grow financially. These four sources of capital are Human, Intellectual, Social and Financial. In order of importance for your family.

Interestingly, of the first three, one of each of the core strategies to build generational financial capital leans upon them.

I’ll be brushing on each of these types of capital in this post, but for a more in-depth description of how to build and grow each of these, there will be links to each of the respective posts discussing that type of capital.

Perception of Capital

As a founding father or founding mother of a legacy family, it is imperative to start thinking of capital in a different light.

The majority of ordinary folks with ordinary families and ordinary financial goals do not consider these factors.

The term money often refers to fiat currency, cash. And capital in this sense talks about cash. But for a dyansty, capital is so much more. Simply handing over money to your descendants will end with what happens to most inheritances…they’re squandered. Instead dynasty founders don’t focus on getting the money ready for their descendants, but instead focus on getting their descendants ready for the money.

Those aiming to build true, long term, generational wealth (aka old money) and a dynasty have a different approach to capital. And as a founding parent of your own dynasty, you’ll need to adopt this mindset on the four types of capital.

All the Money in the World…

4 Types of Capital Money

Not all the money in the world but enough to demonstrate my point, and write a pointless caption on…sorry about that.

So why not just focus on the money? Well, let’s jump on a tangent for a minute and consider a lottery winner.

I probably don’t need to be the one to tell you that most folks that win the lottery wind up more miserable than they were before. Most end up with a large and crippling debt and have people that prey upon their windfall wealth until they have nothing left.

Money that is too easily granted tends to leave in just the same fashion. It doesn’t possess the value to its steward.

Just like if I gave you first place in a race you never ran, the first place medal has no meaning or value to you. The people who get a windfall of cash like lottery winners have no concept of what that wealth truly means or its real value, and thus don’t respect it.

The Curse of Wealth

Intergenerational wealth is the same. Large sums of wealth simply handed to descendants is often taken for granted, lost, gambled and spent. It can lead to disputes, hatred, and in the worst cases, embittered adult children, waiting for their geriatric parents to die so they can finally be happy with their inheritance. And that’s an incredibly sad end to a life.

Really, it takes time to learn how to keep money, and more importantly, it takes 3 other kinds of capital to nurture it, grow it and perpetuate it to intentionally prepared future generations.

You’ve probably worked hard for a few dollars in your life. You would probably prefer to invest it, to get it to work for you and your family. But if you were to give a sum of cash to a stranger on the street, do you think they would care the same way as you do about it?

Human Capital

4 Types of Capital Human Capital

No caption here, this just looks like a nice afternoon out.

Without humans, people, members, there is no family. But human capital isn’t only limited to this, there’s also friends and support people as well. There are direct descendants, spouses, adopted children, godparents, grandparents, grandchildren, girlfriends, boyfriends, ex-spouses(in some cases)…you get it.

All the members have their own attributes, talents, and personalities.

Some are smart, others not so much. Some have a good head for numbers, others a talent at the written word. Some good at speaking in crowds, others are more reserved. Some creative, others confounded, driven and lazy.

Building on Human Capital

Whatever raw material your family is made up of, you can improve it.

How? You start by being the best parent you can be, educating yourself in the art and study of proper parenting and raise calibrated kids.

Through this you can nurture your descendants, building upon their strengths and mitigating their weaknesses, all the while getting to know them as people while they blossom into adults.

Get involved

Being involved as much as you can in the life of your young family will build upon the bonds and abilities of your descendants. Happy children with loving parents usually wind up being the most stable and well adjusted adults.

Too often money focused parents leave their children with transient caregivers that come and go, leading to emotional detachment. This is why having stay at home parent, is the best move you can make towards establishing a dynasty. A stay at home parent will help keep you off the dual income treadmill as well as turn the house into a home, manage the family and distill the family culture into the next generation. They help form and maintain traditions, resolve conflicts and make sure children get a full and proper education.

Culture & Closeness

Human capital also means the closeness of the members of the family, the culture, and emotional resilience. Obviously, the ability to get on, to forego immediate gratification and work hard to build a fortune is important as well. Your family, the human capital will need to be able to pull together, to protect itself and achieve collective goals.

Without a doubt, human capital is the most important resource of the four when it comes to creating a legacy family and generational wealth.

Intellectual Capital

4 Types of Capital Intellectual Capital

Others have been playing checkers…I’ve been playing chess for years. (Hope this reference isn’t a stretch lol)

Intellectual capital is the collective knowledge and skills of a family. This is one of the easiest areas to improve, invest and build upon. Skills and knowledge, facts and studies learned over years of experience can be passed down to descendants and new family members.

A parent who is a prudent investor can teach their children to do the same.

It can also serve as a fountain of sustainable wealth in and of itself. A family whose founding father is a plumber can educate his children in this high-in-demand trade.

Not So Simple

It may seem like this is rather straight forward to improve upon. Simply send your children off to university and have them return with a bunch of information to apply to a family business or to a career right?

Well, this isn’t always the case. While a college education is downright necessary for most people and a lot of professions, it isn’t the be all end all. Most entrepreneurs and channels specifically about this will say that experience is far more important. Fail early and often and learn from people that have done then do the same or improve upon it.

If your family business was a restaurant, do you think you’d be better off learning how to run it through employment at various 5-star restaurants across the country, or studying the culinary habits of people in the 1980s?

There’s also the benefit of adding two or more minds together. Jumping back to the plumber example, if this patriarch had 3 children, one studied electrical, one building and the other learned sales, well then you have the makings of a rather all-encompassing property services business.

Social Capital

4 Types of Capital Social Capital

Let’s shake on it ol’ chap.

Too often building social capital is neglected by people. You can’t make old friends, as the saying goes. A legacy family needs to surround themselves with great people, building a reliable network which can be leveraged for massively beneficial purposes.

By building a social network of true friends and great contacts is crucial. Think of each relationship and time you put into like an investment in the loosest sense. Of course, you want to actually like and enjoy the company you keep and contribute to the lives of.

But remember this means giving back too. You cant make demands of others and give nothing in return. It means helping your friends build a fence in the weekend, it means attending that dinner party you don’t want to go to. Donating to the charity dinner, organizing meet-ups and connecting others.

Leverage

Your family should be a fulcrum; a central contact point for others. People should want to know your family for their connections. These connections will serve as gateways to opportunity. Both for you as the founding generation and future generations. Perhaps an old golf buddy of dads is looking to stock new food items in his small grocer, the kind the daughter of said dad has just created in her small business.

Funny, before the world of internetted social networks, the original social network was the family. People met through common acquaintances and often got married to people that relatives or friends knew originally. That’s how my wife and I met, through our mothers.

Financial Capital

4 Types of Capital FInancial Capital

Just a spare briefcase of money I had lying around…

Financial capital is the least important type of capital for a generational wealth family. But this is NOT private money, it isn’t like ordinary money. No, this is wealth to last generations. Financial Capital, at least for a dynasty, is wealth that is used for the internal development in both creativity and competency of its members.

It can be loaned, it can be invested, leveraged, or leaned on, but never consumed by any individual, especially for lavish reasons. It is used to improve the lives, not the lifestyles of the constituent members of the family.

The Master of Time

Family financial capital isn’t constricted to the lifetime of any singular individual of a family. This capital can buy the family houses, for them to rent back, it can provide a collective vacation home that is airbnb’d out when not it use.

It can grow forests to be cut down for lumber. It can fund business ventures and provide higher education, open doors to country clubs and prestigious social groups but it is never to be consumed.

This is the kind of money that changes and shapes the world, institutional money. And like all institutional money, it has people that take care fo it, both internally, in the family, and externally through advisers, if the collective fund is great enough.

You’ll need a method to build this sort of wealth too. You don’t need to be Jeff Bezos, Warren Buffet or Sam Walton to create the kind of funds to perpetuate old money. I have 3 different approaches for you. The Great Accumulator, the Collective and The Family Business. Link in the description to the video that covers this subject so you can find the method that best suits you.

To Summarize…

To quickly summarize, these were human, intellectual, social and financial. You can click on any one of those to learn about the type of capital in detail, but I suggest you learn about them in order.

If you already have a family of your own, kids I mean, definitely focus on them first and foremost(human capital), then head on to the others. If this was your introduction to generational wealth, then you should head over to the mega-post to grasp the basics before perusing the rest of the site. You can click here to read up on that.

If you are planning on starting family in the hopefully near future, then there’s nothing stopping you from filling your head with knowledge, build some social connections and start living in a way that lets you build as much financial capital as possible.

You can find more from me over on Twitter occasionally, and on Youtube, where I make a lot of video content on the subject of Generational Wealth.

Yours,

Join the Community:

Find like-minded souls, discuss topics and forge alliances for your Family in the Dynastus communities.

Leave a Reply

First-Time Readers, Welcome!

Dynastus is all about building generational wealth, traditional values and an intentional lifestyle. Through deliberate living and a bit of know-how, it’s possible for everyday families to create a modern dynasty. This site aims to guide you, regardless of your background or situation, towards creating a strong family foundation and then, a dynasty. If you want to join the community of Founding Parents, you’re in the right place. Yours, Ben Signature