Below is a transcript of the video from The Dividend Experiment over on YouTube. He was kind enough to put together a special video for generational wealth builders to get started by applying a dividend strategy to a family investment portfolio.
Special thanks to him for doing this. Be sure to jump over to his YouTube channel and subscribe.
Generational Wealth With Dividends
Hello and welcome back to the dividend experiment.
Today I have a special video about building intergenerational wealth. It is a request by Ben from BlueDollarBull(formerly now Dynastus), he asked me to work together to make a video about intergenerational wealth and, as this is the dividend experiment, after all, I decided to put my own dividend twist on it!
So to start off let’s explain exactly what intergenerational wealth is:
Intergenerational wealth is essentially the money, riches and sometimes status that is passed from parent to child, or across generations. If you have ever wondered how some families have consistently been successful throughout history then the answer probably lies in their intergenerational wealth.
As you can imagine it is a pretty appealing concept to forward-looking families or people trying to start their own dynasty.
Let’s look at an example.
Henry Ford, pioneer of “welfare capitalism” such as the 5 dollar wage and reduced work week and of course the founder of Ford Motors.
If you are a Ford investor then you are probably already aware that the automaker is unlike many other big companies in that it’s essentially still a family business. The Ford family has a controlling vote via a special class of shares, and its interests are represented inside the company by no less than Ford’s chairman, Bill Ford.
He’s Henry Ford’s great-grandson.
Now, those special family shares pay the same dividend as Ford’s common stock, and that’s an important source of income for some family members.
By allowing his descendants to share in the fruit of his labor, Henry afford has created great intergenerational wealth for generations to come.
Just have a look at William Clay Ford’s salary.com account
As Executive Chairman at FORD MOTOR CO, William Clay Ford Jr. made $14,433,967 in total compensation. Of this total $1,650,000 was received as a salary, $1,000,000 was received as a bonus, $0 was received in stock options, $10,266,426 was awarded as stock and $1,517,541 came from other types of compensation. This information is according to proxy statements filed for the 2017 fiscal year.
As you can see he is doing pretty well for himself!
William clay ford is not the only Ford family member that benefits from the stock and dividend payments, they can all be supported by the hard work that Henry Ford put in many years ago.
That, for me, is the benefit of intergenerational wealth – seeing the fruit of your endeavors being passed on to your descendants.
So How Can You Create Intergenerational Wealth?
The first step is to accumulate a massive amount of assets.
If you are familiar with this channel then you probably know that my own personal aim is to buy enough dividend stocks that will pay out enough money to cover my day to day living expenses. In order to do that you have to map out your expenses and see what you are spending on an annual basis. After you have done that it is a case of buying good quality companies that pay enough dividends a year to cover them all. It’s a simple premise, but not easy to accomplish by any means.
As you can imagine, where providing financial independence through dividends your yourself is simple, providing intergenerational wealth for the future is much more difficult.
You will need to accumulate enough dividend-paying assets that not only pay enough to cover your own expenses but to support your children and grandchildren and then their children too.
How much money do you need?
I’m not going to give you the false hope motivational speech here, it’s a lot of hard work (and some luck). Is it possible to accomplish, yes of course. What you will need, however, is to make sure you have a focused approach and a long-term outlook.
If you want me to give you an exact figure of how much you will need than I am afraid that is impossible. Just as I couldn’t give you a figure that you would need to be financially independent as it depends on your spending, I can’t give you a figure on your descendants future spending either.
It will be a large amount of wealth to accrue but luckily for you, compounding and time will be on your side. The idea of compound interest and investing has been done to death so just take a look at any compound interest and you will see the exponential growth you can achieve once you let your money go to work. As time is on your side throughout the many generations in your family’s future then you will have the benefit of the full force of compounding returns.
If you research the Rothschild family you will find a very successful example of intergenerational wealth. Originally Mayer Amschel Rothschild was born in a Jewish ghetto in Frankfurt in 1744, he only started his world-famous wealth building dynasty once he started a banking business in Germany. Centuries later his multiple descendants are still multimillionaires thanks to compound growth and a strong focus on wealth-building.
Of course, you don’t need all of your great grandchildren to be multimillionaires to be successful at creating intergenerational wealth but we can use the same premise as the Rothchild’s when starting our own dynasty.
What Will You Need to Build to Create Intergenerational Wealth?
As we have already seen, in order to build you will need build up your wealth reserves. However, that is not enough.
The next step is to buy some high-quality dividend companies. Note the focus on high quality. Don’t be lured into thinking that high yields will get you richer faster. Remember that your investments need to be long term focused rather than any sort of get rich quick mentality. These investments could and should out live you in this style of investing.
You will also need to make sure your family is structured in an ordered manner and most importantly all buy into the premise of building intergenerational wealth. This is a key concept, divorce and children’s overzealous spending habits can eradicate any hope of you securing your dividend dynasty.
This was a suggested video from Ben from BlueDollarBull(now Dynastus), if you want to find out more about intergenerational wealth building, he has a mega post on this exact topic over on his website and I will put the link in the description.
If you think The Dividend Experiment is interesting or going to be interesting, then please feel free to subscribe. Remember this month I will be doing my end of year review and we can see exactly how well the dividend experiment portfolio is doing against a variety of benchmarks.
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Thanks for watching and I hope to see you on the next video!