Why Rich Kids Don’t Stay Rich

[SoulManX]

Rich kids, we hear, have it all. Money. Connections. Top educations. Cars and clothes. For those who are part of what Warren Buffett calls “the Lucky Sperm Club,” life is supposedly one long shopping trip with an no-limits ATM card.

But what if it’s not? What if growing up rich actually has disadvantages? And what if rich kids’ penchant for spending — and their lack of experience at earning — catches up with them, and that unlimited ATM machine winds up empty? (Not to feel sorry for these people, just to point out a reality.)
That’s the premise behind my article in the Los Angeles Times today, which profiles a wealth-education camp designed to teach today’s rich kids how to manage their money. My conclusion is that despite all their supposed advantages, today’s rich kids have grown up in such bubbles of privilege that they’re not prepared for today’s increasingly competitive job market. They don’t make good investors, they don’t compete well for the top jobs, and they’re not hungry for success like kids who grow up in middle-class homes can be.
Eventually, I argue, their money will run out. And much of the inherited wealth in America will flow back to people who actually earn it — as it has throughout history. This is what makes wealth in America dynamic, rather than dynastic.
Some readers disagreed. One sent me a thoughtful email arguing that “the ultrawealthy are not stupid. They know their children. Some just fork over hundreds of millions to willing yet untrained hands, but I think most set up foundations or other mechanisms that will keep their name and children in the pink for generations to come. The very smartest and most family-oriented probably even invest in training their children to take the reins.”
In other words, rich parents don’t give their money to irresponsible kids. I’m sure this is true for some families. But in my experience, rich parents can’t help themselves when it comes to spoiling their kids, no matter how irresponsible those kids are with money. And those kids usually wind up squandering their money through bad investments, bad relationships or lavish shopping sprees.
Since there are no reliable data on this, we have to go by experience. What do you think? Will today’s rich kids stay rich, or wind up leaving the bulk of their fortunes to the rest of us?




http://blogs.wsj.com/wealth/2007/07...mod=homeblogmod_thewealthreport?mod=fpa_blogs


http://blogs.wsj.com/wealth/2007/07...mod=homeblogmod_thewealthreport?mod=fpa_blogs

 

[Zero_Vault]

Does this come as a surprise?

I sure as hell don't.

Rich people are not really rich. True rich people do not wear fancy clothes or buy fancy cars with ten inch rims--they just accumulate their money and buy hotels and vacant land. Invest 10,000, and bring back over a quarter million.

 

[PyroChamber]

^Yeah, it's always those new money people that like to flaunt their money around. The ones that come from old money usually keep how much money they have to themselves.

 

[Warhammer]

Teenage girls at my school flaunt their money all the time.
Too bad they're as smart as a rock.

 

[terry78]

You don't need to let people know your ass has money. That just makes you a target anyway.

 

[MakeMineMarvel]

Well, I don't want to register with the L.A. Times, but I do know that only about 2% of inherited wealth is ever increased but the heirs.

 

[Arkady Rossovich]

If the rich spend the money,the common people will benfit from it.Why?Because that money is put back into the economy.

 

[Kritish]

Women are the worst, I don't get me wrong, there's tons of dumb ass men out there two but women are the worst when it comes to handling an inheritance.

 

[Sun_Down]

My parents are technically pretty well off, but I grew up to be pretty good with my own money. That's probably because my parents seem quite determined to spend every penny they (read : my father) make(s), so they never had the money to ever spoil me.

 

[doc ock rules!]

I was under the impression that rich kids stayed rich.

In my experience, most of the middle class seem to raise children who go on to be middle class citizens and the upper class seem to raise children who go on to be upper class citizens.

I believe that the more resources a child has, the more educated they will grow up to be. Rich kids get private school, middle and lower class kids get public school. Therefore, they already have an advantage. Plus, as mentioned in the article, the rich aren't stupid. They're not going to just hand over the reigns to their business to someone incompetent- not even if its their own son/daughter. I'd say it's far more likely that they'd either train their son/daughter to take over the business or leave them some holdings in the business/an inheritance.

That's just the first opinion to mind, though.

 

[Concept Name]

any rich people here? wanna read some responses.lol

 

[terry78]

When you become nouveau riche, that's when you splurge and flaunt it. Suddenly getting a whole lot of money when you were just scraping by before is a massive change, and they don't know how to handle it. Whereas if you've been pretty well off, and you get some more cash, you know to invest it, just let it sit and earn interest, etc. I wouldn't start buying up **** if I came into money, I'd still keep my job, just put most of it in the bank, and gradually do stuff like buy a new house, new car, etc.

 

[PyroChamber]

There's 2 things I've always wondered 1) what percentage of the country is actually rich? and 2) if you are a rich person, how much money do you take with you when you leave the house?

 

[sinewave]

i remember seeing some documentary made by a rich white kid about his fellow rich white kids on one of the movie channels, maybe IFC. it was good, but pretty much enforced the stereotype that they indeed are vapid, shallow twits with superiority complexes and no working knowledge of the real world.

 

[Ahura Mazda]

The people who are truly rich are those you will rarely notice are very rich when you meet them. I work for a billionaire and he drives a volvo (or someone drives him) and is discreet. Of course when he travels it is by private jet and he has houses in many places, not to mention other things.

I have also seen people with new money flaunt as well as seeing a man who had inherited over 100 million in the early 60s squander all of it away so that now he is almost penniless.

The best thing for anyone to do if they do not know how to invest is go see a private bank such as UBS or JP Morgan and give their money over to a manager who will at least guarantee some type of return on their cash.

 

[PyroChamber]

You really want to see kids from new money flaunt it around, all you have to do is look at those ignorant twits on Super Sweet 16.

 

[terry78]

I still don't get how the Paris Hiltons of the world flaunt it around when they've been socialites for years. There are exceptions to the rule.

 

[lollycop]

Maybe some kids are spoiled?

 

[Anita18]

Well, it depends on what you consider rich. My parents are pretty well-off - my mom quit her job about a year ago and now stays at home and gardens. (Although, she was only able to do that since they sold their Bay Area house for a nice, fat profit.) I'm one of the most frugal people ever, and I fully believe it's because I was raised that way.

I have no idea how much my parents are worth. I know that my mom made close to six figures at one time, and my dad less than half of that. I was filing for the FAFSA so they had to tell me, LOL. They could afford to send my sister and me to private colleges.

But our college educations were practically the only things they splurged on. We never eat out, we don't have designer clothes, we don't have fancy cars, we don't go on fancy vacations. My mom, sister, and I have never even had a manicure. My mom says that where they are now (California's Central Valley, middle of nowhere), their neighbors would be SHOCKED to find out how much she made a year ago. But nobody notices cause we don't flaunt it. For us, being upper-middle-class only means that we don't have to worry about paying the bills next month. That's it. It doesn't mean that we should spend on unnecessary things.

I know plenty of kids who spend like no tomorrow, and it's either because they feel entitled to spending that much, or their parents are never-ending fountains of money who can bail them out anytime.

 

[terry78]

^So instead of Rolex, you guys get Faux-lex.

 

[doc ock rules!]

I still don't get how the Paris Hiltons of the world flaunt it around when they've been socialites for years. There are exceptions to the rule.

I don't know if they're flaunting it so much. From my experience with rich people, they'll sometimes lower themselves to idiocy with the regular bunch of people to fit in. However, I only know one rich person so yeah.

Still, what do you think of when you hear Paris Hilton? "****ty, party ****e" or "money ****e?"

 

[doc ock rules!]

Well, it depends on what you consider rich. My parents are pretty well-off - my mom quit her job about a year ago and now stays at home and gardens. (Although, she was only able to do that since they sold their Bay Area house for a nice, fat profit.) I'm one of the most frugal people ever, and I fully believe it's because I was raised that way.

I have no idea how much my parents are worth. I know that my mom made close to six figures at one time, and my dad less than half of that. I was filing for the FAFSA so they had to tell me, LOL. They could afford to send my sister and me to private colleges.

But our college educations were practically the only things they splurged on. We never eat out, we don't have designer clothes, we don't have fancy cars, we don't go on fancy vacations. My mom, sister, and I have never even had a manicure. My mom says that where they are now (California's Central Valley, middle of nowhere), their neighbors would be SHOCKED to find out how much she made a year ago. But nobody notices cause we don't flaunt it. For us, being upper-middle-class only means that we don't have to worry about paying the bills next month. That's it. It doesn't mean that we should spend on unnecessary things.

I know plenty of kids who spend like no tomorrow, and it's either because they feel entitled to spending that much, or their parents are never-ending fountains of money who can bail them out anytime.

I think my family will be on the same pages as yours is in a few years. My dad holds on to money like there's no tomorrow and studies anything and everything about the economy, investing, etc. It's true, though, that if you don't spend much money on silly, useless things, and you invest your money correctly, you can end up with a lot.

My dad's been trying to teach me for a few years how to manage my money. He gave me a turtle account, tried to get me interested in book and magazines dealing with the economy, and even offered to allow me to play the stock market a few times.

 

[Magneto630]

Rich people are not really rich. True rich people do not wear fancy clothes or buy fancy cars with ten inch rims--they just accumulate their money and buy hotels and vacant land. Invest 10,000, and bring back over a quarter million.

^Yeah, it's always those new money people that like to flaunt their money around. The ones that come from old money usually keep how much money they have to themselves.

The people who are truly rich are those you will rarely notice are very rich when you meet them.

Exactly!

 

[kytrigger]

All the rich kids I went to highschool with are still rich now...

 

[Zero_Vault]

This is how I see it.

If you make more than 50 million, I consider you rich.

If you make well less than 50 million, you are poor as ****.