Last Thursday (August 6, 2009), I was listening to Colin Cowherd on ESPN Radio. I consider him to be the best and brightest radio host in America. I also admire him because he has been saving 40% of his income every year since he started working. Mr. Cowherd pointed out that 92% of the millionaires in America come from middle class or blue collar backgrounds. It has been his experience that the adult children of wealthy families are underachievers, not repeat winners. It should not be surprising that most millionaires come from blue collar or middle class backgrounds since these groups make up 97% of the households in America. Mr. Cowherd’s opinion of “rich kids” was formed from observations of casino owners’ children in Las Vegas (one of his first jobs was working at a radio station in Las Vegas). It is easy to suggest that the so-called second generation wealthy are unproductive because, in most cases, the media focus only on the slackers among all of those who are the products of wealthy families.
But what do I know from my nationwide studies of millionaires and their children? Typically a millionaire couple produces 3 children. One becomes even more successful than his/her parents. At the other end, one requires heavy doses of economic outpatient care to sustain a high consumption lifestyle. The productive child will receive little or no outpatient care or inheritance. But he/she will take on the major responsibility for caring for his/her elderly parents, executing the directives in the will and making certain that the unproductive sibling/siblings are provided for. If you would like to get a quick look at the two distinctive types of children produced by wealthy families, you may wish to read my paper “The Financial Lifestyles of American Millionaires” which is published in my book, Marketing to the Affluent, pp. 260-284. In this paper I profiled 5 segments of the millionaire population. Segment 4 is labeled “Inheritor/Achiever.” About 1 in 10 millionaires was in this segment. Twenty-four percent of their wealth came from inheritance, but they were able to generate $4.2 of net worth for every $1 they inherited. Plus “its members have . . . the highest mean income and net worth of all the millionaire segments studied.” Nearly 8 in 10 are entrepreneurs who started their own businesses. Segment 5, the “Inheritor/Underachiever,” (8.8%) inherited 50.3% of their wealth and were able to generate only $1.9 of net worth for every $1 inherited. They were significantly more likely to be “executives” for mom and dad’s business or middle managers of public corporations. They were more than twice as likely to be college dropouts and significantly more likely to be divorced than the millionaire population as a whole.
Many wealthy couples do a fine job in raising their children. These parents spend time and effort focusing on discipline, genuine achievement and independence. Donald Trump is a perfect example of this. And he apparently is doing the same for his own children. One of the intriguing parts of studying the affluent is exploding some of the many myths of this population. I will continue to do so with great enthusiasm (taking time out, of course, to listen to The Herd)!