In America, the pursuit of generational wealth has been an enduring aspiration for countless individuals, but it has often been an elusive dream, especially for the Black community. The setbacks of the Jim Crow era, such as the destruction of Black wealth epitomized by the tragic events of Black Wall Street, and the systemic exclusionary practices in housing, banking, and educational systems have significantly hindered wealth accumulation. Nevertheless, even in the face of historical injustices, one powerful financial tool for empowerment. In this article, we will demystify compound interest in the simplest terms, provide real-life examples, and offer actionable steps for individuals who are determined to build generational wealth.
At its core, compound interest makes your money work for you. It is the interest earned not only on your initial investment or savings but also on the interest that accrues over time. In simpler terms, compound interest is like a snowball rolling downhill, gathering more snow and momentum as it goes.
To illustrate this concept, let’s consider Judy.
In this article, we will follow Judy as she moves through various financial stages to achieve financial security and begin building generational wealth.
Judy is a single mom of two, juggling a minimum-wage job just to make ends meet. Just like countless other Americans, the idea of building wealth that can benefit future generations often feels like an impossible dream. This struggle becomes even more challenging when you’re living in a high-cost city like Los Angeles, San Francisco, or New York, where the average rent for a two-bedroom apartment is sky-high. When you take a closer look at Judy’s situation and compare her income to the cost of living in these cities, it’s clear that she’s not only struggling to make ends meet but also finding it nearly impossible to set aside any savings.
So, what is the first step Judy can take towards financial freedom?