Income investing is not the first thing most people think of when they consider what they want to pass on to their loved ones when they die. Aside from love, values, family heirlooms and a good education, they tend to think of assets.
A portfolio of stocks, bonds, certficates of deposits or a family business are how they think of the financial accumulation of their lives.
However, thinking of those things as assets implicitly means they have value only if sold. And once they're sold, you don't own them anymore, and so cannot pass them on to future generations.
Think About Income, Not Assets
And once you're dead and your family inherits those assets, they are useless unless they produce income. Young members of your family will be tempted to sell them when they need to raise some cash.
I received an inheritance of one hundred shares of Ralston Purina stock from my grandfather. I'm sorry now, but I sold it to pay off to pay a few of the many bills I owed in the wake of my marriage. I wish now I'd held on to them, and reinvested the dividends.
That brings out another point. Whatever you leave your heirs, make sure they understand its significance.
You want your children and grandchildren to have it easier than you did. You want them to benefit from your sacrifices and hard work. Part of that is giving them a good education so they can get a high paying job so they can benefit from their own sacrifices and hard work.
Your Loved Ones Will Face Financial Challenges You Didn't
However, some cash never hurts either. It's apparent that younger generations of Americans, Europeans and Japanese are going to have to cope with unprecedented financial problems. It's a different world than what our parents and grandparents faced.
Hard work, sacrifice, or even a good education are not going to be enough to cope with the problems caused by declining currency rates, confiscatory taxes, unstable real estate prices, crushing debt in both the public and private sectors, and inflation or deflation.
Economic factors that helped earlier generations build their wealth have shifted in the opposite direction.
However, if you pass down income investments to your family members, they can hold on to those through their own life spans. While they're working, they can reinvest the dividends and interest to grow the portfolio they inherited. If they can afford to contribute to it out of their earnings, so much the better.
If they are unable to, which can and will happen due to various circumstances, their retirement portfolio will still grow.
Like a Snowball Rolling Down a Hill, Your Portfolio of Income Investments Can Grow Into a Gigantic Legacy
If they continue the tradition, they can pass on a huge portfolio to their children, so your great or great great grandchildren may be incredibly wealthy.
Teach them the significance of what you're doing. I thank my grandfather for the example he set for me, but I wish he'd done more than set a good example -- which I didn't appreciate for nearly three decades. (To be fair, I was a rebellious hippie and probably wouldn't have listened to him.)
I wish I still had the financial inheritance too, and the income investing to make it grow.
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