Residual income can be many things – it can be interest income from a savings account, small royalties or dividend payments from creative work or investments, or even rental fees from income property. In my case, my residual income takes the form of small dividends from some minor oil leases that have been passed down through several generations of my family.
How Residual Income can Benefit Generations of your Family
The exact details are hazy – this all happened decades before I was born but from what I can piece together, my grandfather or great-grandfather had a business investment in some budding oil wells in Kansas. The business dissolved at some point, but he retained some partial shares in the oil rights as his share of the partnership.
Building Generational Wealth with Residual Income
This was probably in the 1920’s – almost 100 years ago. By the time I came on the scene in the 60’s, the older generation had passed away and the oil shares had been inherited by my Dad and his brother.
Even though amount of shares must have been very small – (the portion I eventually inherited is incredibly tiny, not even 5% of one share), the residual income was enough to provide my father and his brother with a fairly steady income – about $600 or $700 a month, which was a chunk o’ change back in the day.
However, the oil business is a chancy thing so it fluctuates up and down based on the current oil pricing. By the time I was 16, my dad gave me my shares as a sort of ongoing allowance. At that time, the residual income was bringing in a regular $80 or so a month, which was just enough to pay for gas, insurance, and repairs on my junky little car.
So, this tiny little investment had already provided varying amounts of income to my family for more than 100 years. I’m now in my 60’s and my folks are now gone, but my little checks just keep rolling in regular as clockwork.
I’m the only person I know who is pleased when gas prices go up, because I know my checks will increase accordingly. But then when it goes back down, my checks dwindle as well – so it’s small, but steady.
The schedule is a little random, but my checks always seem to show up when I most need them. I think of it as my Dad still sending me my “allowance” when he sees things getting a little tight down here.
So, why am I sharing this with you? I think it’s pretty amazing that this minor investment from my great-grandfather (that I never met), has sustained our family in large and small ways for about 100 years and counting. It has paid for groceries, car insurance, vacations, college tuition, and a host of other things that has brought his descendants comfort, security, and enjoyment.
I’m sure he was tempted to sell it at some point, and probably so was my Dad. I get offers probably a couple of times a year – generous offers of thousands of dollars for my tiny little annuity, but I wouldn’t ever sell it unless I am absolutely flat broke and headed for the streets.
In that way, I think I am different than a lot of people. I know some of my cousins have received these offers and sold their shares off. But think about it – that’s like killing the golden goose.
If these companies are willing to offer me that much money for them, you know the lifetime value of it must be much greater, but most people just see the big chunk of money and don’t see the value of all the tiny little checks. And these large companies can well afford to be patient because they have thousands of these little annuities pumping out their little checks month after month and year after year.
And if I had taken their offer what would I have done with that money? I would have paid a bill, bought a vehicle, or maybe splurged on a nice vacation. But then what? No more checks, no more little surprises, no more extra money to tuck away for an unexpected bill, or a little weekend getaway when I need one. It’s like trading your paycheck for a wonderful meal, but after you’ve eaten the meal, then what do you do?
With any luck, I’ll be able to pass this legacy down to my own children. In fact, I’ve been keeping my eye out for a similar investment of my own. It’s definitely tricky to find something that is a good deal and is going to result in a comfortable income, but it is definitely worth looking into.
I would love to have a legacy like this to pass on to my grandchildren and unborn great-grandchildren. Wouldn’t you? It’s definitely something to think about. You never know what situation they might be in 50-80 years from now.