How Generational Wealth Affects First-Generation Students

Generational wealth can have an impact on all students seeking a college degree. Discover wealth-building resources for first-generation students.
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  • Twenty percent of families have zero or negative wealth, which limits academic options.
  • Generational wealth affects social mobility, financial security, and access to resources.
  • First-generation students usually have less generational wealth than their peers.
  • Students can build generational wealth with the help of strong financial literacy skills.

Generational wealth contributes to financial stability for students well beyond their college years. Lack of access to generational wealth impedes many first-generation students — those whose parents did not earn a four-year degree — from breaking out of the cycle of poverty.

For those who aren't inheriting wealth and receiving financial support from their family for college, pursuing higher education can prove financially risky. A lack of generational wealth can hamper financial stability for first-generation students who often have lower incomes and higher student loans.

Financial literacy — the ability to understand personal finance skills like budgeting and investing — can play a critical role in your economic stability.

The following sections provide information about how to improve your financial literacy, build wealth, and influence the financial security of future generations.

What Is Generational Wealth?

Generational wealth is the accumulation of valuable assets passed down from one generation to the next. These include inherited family wealth like bank accounts, property, real estate, stocks, life insurance benefits, trust fund accounts, family businesses, and other investments.

One in five families has zero or negative wealth, meaning their debt is higher than their total assets and income.

Families lacking generational wealth often must deal with societal inequities, such as lower homeownership rates, unequal access to higher education, identity discrimination, and a lack of social mobility.

First-generation students — predominantly from minority and/or low-income backgrounds — usually have less generational wealth than their peers.

Homeownership, the most common source of generational wealth, belongs in significant numbers to white college graduates. Additionally, 43% of people in the United States cannot afford to carry life insurance policies that can provide financial security to their families after they die.

These missed opportunities for building generational wealth stem from inequitable access to education, pay inequality, and discrimination.

Lacking generational wealth hinders a person's ability to move into higher socioeconomic classes, also called social mobility. Family wealth also offers a level of security for students that some first-generation students cannot access.

This means students from wealthy families can focus on academics and other future pursuits, while those from families without generational wealth are unable to access the same ability to study, afford food or books, and pay a tutor, among other opportunities.

Their grades may be lower, and they may not be able to participate in clubs or other social activities that can help further their careers.

And the cycle of generational poverty continues.

Earning a college degree can improve economic stability, but tuition affordability can hinder wealth accumulation.

The Impact for First-Generation Students

For first-generation students, a lack of generational wealth can play a critical role in establishing financial well-being. Wealth has an impact on access to adequate education, safe and consistent housing, sustainable food sources, and financial security.

First-generation students are more likely to come from low-income and low-wealth families. Only 30% of first-generation students from low-wealth families complete two or more years of college. And as college tuition increases and student debts rise, the financial impact on first-generation students grows more than it does for their peers from wealthier families, increasing the cycle of inequity.

First-generation students who graduate increase their economic stability in comparison to their peers who do not graduate. Graduates tend to earn higher incomes and accumulate more wealth over time. While the long-term financial benefits of a college education for first-generation students are compelling, attaining a degree can prove financially challenging.

First-generation students are more likely to be forced to take on high student loan debts to pay for college. They then use a significant portion of their post-graduation income to pay off these debts, further slowing their ability to accumulate wealth.

Low family incomes paired with high student loan debts can create additional obstacles for accumulating wealth and obtaining financial security.

The learning doesn't need to stop here

Explore the rest of our collection of financial education resources to continue your journey to a healthy financial future.

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How Students Can Build Generational Wealth

Building generational wealth takes intention, time, and a financial and social system that facilitates access to these kinds of resources. We must all learn to manage our money in order to build wealth. All students must learn to manage money, but improving financial literacy is an essential first step in learning how to manage the existing systems to accumulate wealth.

Online lessons — like Bankrate's free personal finance hub — provide a financial education to improve your understanding of investment options, savings plans, and repaying student loan debts. The Federal Deposit Insurance Corp. also offers a free financial education program, Money Smart, that teaches financial skills to learners of all ages.

Many colleges and universities offer courses in personal finance, investing, and other financial literacy topics. Ask your college counselor about available course offerings at your school. Several states, like Washington, offer free financial capacity classes, too.

If courses are not available, consider a personal finance book to learn tips for budgeting, paying off debts, and moving toward financial independence.

Take advantage of debt-free college payment options when you can. If you do have student loans, learning to budget in college can increase your savings and aid in necessary loan repayments.

Since your credit score has an impact on interest rates for loans and home mortgages, make sure to research credit card options that help strengthen your credit score before opening any new accounts. Be careful of credit card companies that come to campuses to offer free cards to students. Often their interest rates are particularly high.

As you improve your financial literacy, you can more easily adapt your financial plans to life changes like getting married, having children, or caring for family members.

Share your knowledge with your family to help build and sustain familial wealth, further increasing generational wealth opportunities.


Generational wealth can increase opportunities to attend college without taking on student debt. Graduating from college without debt increases your likelihood of homeownership, a primary builder of generational wealth.

Building generational wealth requires continuous effort. For first-generation students from low-wealth families, building wealth is particularly challenging. A deliberate effort to take financial capacity classes will be highly advantageous.

Financial literacy is an ongoing learning process that can improve your ability to build wealth over time. Begin your financial education now, with small steps that lead to establishing generational wealth.

Feature Image: MoMo Productions / DigitalVision / Getty Images