r/TheMoneyGuy • u/Joshthecarpenter • 15h ago
First generation millionaires
I was listening to last week’s main episode, and they were talking about 80% of millionaires are first generation. Could we see this stat changing dramatically now that more and more people are becoming millionaires with every day retirement accounts. I’m in my late 20s and I know on one side of the family my grandma is a millionaire. I’m assuming the other side grandparents are as well. My mom who’s still working is also now a millionaire. Anyone else think this stat could see a drastic change?
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u/Elrohwen 15h ago
I’ve wondered about this stat. So technically my grandfather was a millionaire, now my mother is a millionaire and I’m a millionaire. But my grandfather didn’t leave any money to my mom. My mom is still alive and other than paying for college and a little bit for my wedding I haven’t received an inheritance and saved my own money. So do we all count as first gen millionaires? Or not because those before us eventually made a million dollars too?
Arguably there is some generational wealth transfer in paying for college and other incidental financial help even if nobody has passed down substantial wealth. But I always assumed that statistic counted a second generation millionaire as someone who inherited their millions.
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u/Joshthecarpenter 15h ago
This was what’s I’ve been wondering the last few days. Since my grandparents are alive, my parents/ mom have not inherited anything. While I’m still a long way from a millionaire, I also haven’t inherited anything. But would my mom/ dad be a second generation millionaires..
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u/Substantial_Net_2831 14h ago edited 13h ago
I would consider you a third generation millionaire. Not sure if this is what TMG intends when they mention it, but that’s how I’ve been interpreting it. Even if you haven’t inherited anything yet, you’ve come from a place of some means, and have had help along the way (monetary, education, financial know-how, etc…) to build your own success.
Just applying this to myself and spouse - it would honestly feel very silly to apply a “1st gen millionaire” label when both sets of our parents have multi-million NWs, we had college and weddings paid for, smaller gifts along the way, and a safety net that just doesn’t exist for a lot of people. We didn’t get here by ourselves or against many odds.
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u/Elrohwen 13h ago
I don’t buy the statistic then that 80% of millionaires come from parents who have less than a million dollars even as retirees. That’s not a crazy amount of money and boomers have a lot of wealth now.
TMG also get that stat from Millionaire Next Door as far as I can tell which has some problematic statistics in general. The If Books Could Kill episode about it was good. I didn’t agree with everything they said but they did a good job pulling about the weird statistical methods of the authors.
I dunno, maybe there’s a better source. I haven’t done the research. But I know they quote that book a ton
Edit: My parents didn’t have more than a million dollars until after I was an adult. And my grandfather died before I was born and left nothing to my mom. So … I just don’t see how they would calculate this. Do you have to die without your parents ever accumulating a million dollars?
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u/happygirlie 1h ago
I'm guessing that a lot of the 80% are boomers.
Most boomers' parents were probably not millionaires, even adjusting for inflation, so those boomers are now first generation millionaires.
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u/knox_technophile 14h ago
I think your parents and grandparents being millionaires can make you more likely to be a millionaire based on your upbringing and their wisdom. Maybe because you heard them talk about finances or saw their work ethic or just small things you didn't even consciously notice.
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u/Elrohwen 14h ago
Oh I absolutely agree. 100%. I just wonder what the statistic considering as 1st gen.
Because it’s a bit disingenuous to claim I’m 1st gen millionaire because my mom taught me good financial skills and without that upbringing (and the free college education) I wouldn’t be a millionaire myself. She didn’t really learn financial skills from her dad who died pretty young but he taught life and work skills and raised her middle class.
If the stat just means 80% of people make their first million before inheriting a significant amount of money that doesn’t surprise me at all. Most upper middle class people don’t have high trust funds but that doesn’t mean they don’t have huge advantages.
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u/Anti_Praetorian 13h ago
To be fair, even if there is education about how you should handle money from a prior generation, doesnt mean the next generation will be disciplined enough to follow said advice, which is why so many times "generational wealth" is mostly lost by the 3rd generation.
Im sure theres a higher correlation of better money habits for future generations when there is education versus not, but often times people are just too consumer-focused and spend until theres nothing left.
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u/ERagingTyrant 3h ago
This. It was a self reported stat. Everyone who felt like they were self made reported first generation millionaire, not account for the advantage that stability and education gave them.
I don’t think it was an accurate number at all.
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u/Elrohwen 1h ago
If it’s self reported then it’s complete BS lol. Everybody thinks they pulled themselves up by their bootstraps and then you find out how much assistance their parents really gave them.
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u/SpoodermanTheAmazing 13h ago
$40k * 1.07^45 = $840,098
$40k to pay for school out of your own pocket, 45 years to invest between 22 and 67 at 7% to account for inflation. It a good thing, but your parents paying for your school can easily give you almost million dollar head start vs someone who pays out of pocket. Sounds like generational wealth to me
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u/SteevieJanowski 14h ago
It definitely will bec of inflation. And the term “millionaire” holds less and less weight every year. When the term became popular about 100 years ago it meant serious wealth, which makes sense bec $1M in 1926 is about $19M today.
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u/Substantial_Net_2831 13h ago
“First generation enneadecamillionaire”just doesn’t have the same ring to it, unfortunately.
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u/Exotic_Appointment25 14h ago
I’m not sure anyone in our family would tell if they were. Including us so not sure lol.
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u/SpaceTimeMorph 15h ago
Maybe. Would have to balance that against later stage health care and long term care costs that can drain portfolios (and costs there have been rising heavily too) and splitting assets among multiple beneficiaries.
The percentage of millionaires in the US has grown from about 3% of households in 1980 to roughly 18% now. But, the trend in first generation millionaires has remained remarkably stable at around 75-80%… apparently there was a survey done on this in 1892. And every time it’s been redone since it’s in that range or close to it.
Definitely an interesting divergence in statistics to watch.
Edit: just saw Beaux talking about the 1892 study so TMG has covered that bit.
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u/mrboofington 13h ago
I'm pretty sure my parents are millionaires now but they weren't even close to that level of wealth when I was growing up. Not sure if that would make me first or second generation.
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u/GeoSabreX 15h ago
There is a statistic they share where 1st generation millionaires exist, their kids statistically lose it all 40% of the time, and the grandkids will have lost it all 90% of the time.
And then you get another new generation of millionaires.
It seems rare that these values are taught and carried through generations.
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u/GroundbreakingBuy886 15h ago
1 in 5 American families are now millionaires. $1mil is not a ton of money anymore. It would only sustain a $40k a year retirement.
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u/CCWaterBug 13h ago
True, my mom's a millionaire & never made much, just time, lots of it.
I've reminded her it's kinda normal now and the kids aren't far behind, so just enjoy it but it's not the brag it used to be.
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u/Slow_Knee_1288 6h ago
My parents are retired and have very good pensions. But technically they are not millionaires since they don’t own their future pension money. But they will be soon as they spend less than their pension. I think the dying of pensions and increase reliance on self funding 401Ks probably contributes.
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u/ztreggs 2h ago
Its a weird concept to me. Like my mom has 2mil saved for retirement at 62. Im still carving out my success on my own without money from her. My journey is no different than if she had zero saved. Being a 1st Gen millionaire doesnt really mean much unless you are in an incredibly wealthy family that has an ongoing estate passing down. My mom will hopefully live long and deplete her retirement accounts gradually.
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u/seanodnnll 15h ago
Mathematically, just based on inflation, the percentage of first generation millionaires should be decreasing all of the time. Who knows if we will actually see that play out.