When watching the typical news story which involves wealth, you often get the strong impression that the wealthy have always been in control; and that it is getting harder and harder for anyone to start at the bottom, and become well off within a single generation.
According to PolitiFact, the top 400 wealthiest Americans "have more wealth than half of all Americans combined. Inherited wealth may help explain why many Americans who have become rich may have had a "substantial head start". According to the Institute for Policy Studies, "over 60 percent" of the Forbes richest 400 Americans "grew up in substantial privilege".
That might be the impression the news likes to give us, but it does not tell the whole story.
In fact, in any given decade, half of all U.S. households move from one income quintile to a different income quintile. For households who started in the lowest quintile of income at the beginning of any given decade, they will have proportionally more income growth than those households who started the decade in the highest quintile of income.
The truth still is that for those who are willing to fight for a position in society, the odds are still good that they will make it quite far.
What is not talked about enough is how much of a disadvantage it is to start life out at the top. For those who had very successful parents, the truth is that very few of these surpass them.
I remember well a neighbor who bought his daughter a new Audi for her high school graduation. He thought he was being kind; but he was setting her up for failure. The truth is that for the rest of her life, anytime she wants to buy a car that is less “prestigious” than an Audi, she will feel like a failure. So, her life choices will be between living beyond her means, or feeling like a failure.
This is why the majority of people who inherit great wealth lose it within one generation. Even those on the very top of the pile end up dropping down the socio-economic order within a decade because of this simple fact.
To quote Wikipedia:
“It is erroneous to assume that individual households remain in the same quintile over time. A majority of households in the top income quintile in one year, for example, will have moved to a lower quintile within a decade. Three out of four households in the top 0.01% of income will no longer be in that small group ten years later.”
If you want your children to succeed you must give them the room to do it. It is like trying to build self-esteem through climbing, you can’t start your child at the top of the mountain.
The problem is that the majority of parents are not as interested in building the self-esteem of their offspring, as they are in stroking of their own ego. They would rather have children that are compliant and look up to them as heroes. It has been an ugly but true fact for many of the wealthy throughout time.
How about you? What motivates your parenting style? Do you have the self-control to live well below your means so that your children will have the room to be successful?
For many parents, they believe the lie that spoiling their children is a way of showing them love. Why do they believe this lie so easily? Is it because it feeds their ego and makes them look like the good guy?
It is an enticing lie, but it is still a lie.
~ The Loan Arranger