Building a firm foundation

When helping people understand how to improve their financial standing, TC Alexander knows he’s frequently battling decades of ingrained lessons on money matters.

Consider the couple in their early 30s who sought him out a few years after attending one of his personal finance workshops. They wanted to share the good news about their new house, their 401(k) plan balances and the college savings accounts they’d recently started for their two young children.

“They came back to say thank you and explained that these things hadn’t been taught to them as they were growing up,” recalled Alexander, community development engagement and education manager with BOK Financial®. “By showing them the benefits of different financial philosophies than what their families followed, they were able to change some of the generational cycles.”

In the process, the couple was building generational wealth and creating a more secure financial future for their children, grandchildren and beyond.

Home is where the wealth builds

A common approach to building generational wealth is through homeownership, which Alexander understands runs counter to traditional thinking in many minority communities and households. Although Black, Hispanic and Asian homeownership rates have been increasing over the past decade, they still are behind white homeownership rates, according to the National Association of Realtors.

“In some families, there’s a strong sense that renting has always made more sense as they focused on avoiding the costs associated with owning a home,” he said. “Plus, they appreciated the convenience when it came to things like repairs, which could be handled with one call to the landlord.”

However, paying rent, as opposed to a mortgage, has excluded such families from building up home equity. As home equity grows, the accumulated wealth in a residence may be accessed through a home equity loan to pay educational costs, start a business or help another family member buy their own home. Plus, home ownership offers select tax benefits and provides a sense of control that a rental will never offer.

“If you’re renting, the owner can raise your rent whenever they want, but with a fixed-rate mortgage, you know what your housing payment is going to be for the next 15, 20 or 30 years,” Alexander said.

Get smart about getting a home loan

Alexander stressed that it’s important for any potential homebuyer to learn about the process—for instance, by attending a seminar that covers first-time homeownership assistance programs. “The first step is to get educated and hear from an industry expert who can answer your questions and give you a realistic view of where you are today on the path toward home ownership,” he explained.

“Then, focus on the financial aspects,” he continued. These steps include:

• Saving money. Even those who qualify for assistance programs will likely need to bring cash to closing, plus cover moving expenses and potentially new furniture or appliances.
• Reducing debt levels, especially those subject to high interest rates.
• Reviewing your credit reports and actively working to improve credit scores.

By taking these steps, you can replace the monthly rent payment you’re already making with a mortgage payment that can help build home equity and set up future generations for success.

As Alexander said, “Ultimately, generational wealth gives the generations that come after yours a leg up. It gives them a great opportunity to get a better start in life because not being buried under debt creates a situation where they have more money to save and invest.”