The key factor that helped 4 in 10 rich people build wealth, according to a Vassar economist

Becoming wealthy sometimes depends on factors "completely beyond our control."


There is lots of good advice out there on how to build your wealth: Invest early and consistently, curb your spending, start a side hustle.

However, this advice ignores how most of the rich and super rich actually get a lot of their money, says Esteban Argudo, an assistant professor of economics at Vassar College whose research focuses on diversity and inequality.

"It is worth pointing out that becoming rich or wealthy might depend on one important factor that is completely beyond our control: receiving gifts, trusts, inheritances or similar transfers," he says.

'40% of the rich and wealthy have received at least one transfer'

The financial "transfers" enjoyed by the wealthy are often quite substantial, according to Argudo's research, which is based on the 2019 Survey of Consumer Finance.

"The data shows that 40% of the rich and wealthy have received at least one transfer in their life," Argudo says, referring to the top 10% of the population. "Furthermore, the amount the rich or wealthy have received in transfers is on average four times the size of their income."

For the most affluent people, the transfers are even bigger, he says: Nearly half, or "45%, of the super wealthy have received at least one transfer in their life. The average size of these transfers is about $6 million."

The vast majority of Americans don't have access to these kinds of gifts. "Only 20% of regular folks have received a transfer in their life, and the average size of these transfers amounts to only 60% of their income," he says.

Only 20% of regular folks have received a transfer in their life.
Esteban Argudo
assistant professor of economics at Vassar College

While rich or wealthy people might be making savvy financial decisions, it's likely that they had some good fortune, too. Jeff Bezos is now the richest person in the world, for example, but he was able to get Amazon off the ground in part because his parents gave his fledgling business $250,000 in 1995.

At the time, there was no guarantee his parents would ever see a return on their investment: As Bezos put it later in an interview, "I thought there was a 30% chance that we might build a successful company."

The rich 'may also have inherited all kind of dysfunction'

Before getting envious, you might want to remember than these types of financial transfers often bring with them unexpected consequences, says Susan Bradley, a certified financial planner and the founder of Sudden Money Institute. "Inheritances come with a story," she says. The people who received them "may also have inherited all kinds of dysfunction."

Wealth can result in isolation. Because so few people are super rich, others in their age group might find them hard to relate to. "They are a small, elite club," she says. "They can live a lifestyle the rest of us hear about, but we could never live that kind of lifestyle. They are peerless."

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