Everyone knows wealth is a privilege. Obviously being able to afford a nice home in a safe neighborhood with “good” schools puts you in a place of comfort, safety, and stability.
But there are other perks that come with wealth that make life easier and afford greater opportunity—perks many don’t immediately think of when we imagine the comforts of wealth. When I was younger and only beginning to understand that my family struggled financially, I pictured “rich people” as people who had good jobs and a bank account with lots of savings in it, so they could buy nice things and take lavish vacations. Then, in my twenties and thirties, I was married to a man who had a high-paying job, and I worked as well, and together we built up enough wealth that I became privy to the smaller, less obvious perks of wealth, perks I’m not sure would have stood out to me as unique without my previous experiences of living with so little.
As far as I’m concerned, connections are the biggest hidden perk of wealth. Growing up, I was told, and I believed, that the road to success was paved with hard work and determination. For wealthy people, this is not always true. Plenty of wealthy people work hard, but most work with the same amount of effort (or less) as any low-wage earner. The difference is, in addition to being able to afford the schools that look great on job applications, wealthy people have the connections to wedge themselves and their children into places where the less affluent are far less likely to have access. Wealthy people know other wealthy people who know other wealthy people. Wealthy people get other wealthy people jobs, and get their wealthy friends’ kids interviews, admission to schools, and entrance to prestigious organizations by “pulling a few strings” or “talking to some people.”
A kid who goes to a prestigious school on scholarship, who comes from a family without means, who was the first in their family to go to such a school, will not have quite the same opportunities as the kid who came from a wealthy family full of connections and went to that same school and got that same degree. The wealthy kid has parents who have already been “asking around“ to all their wealthy friends and family, seeking out potential job opportunities. Connections push a resume to the top of a stack of 200. Sometimes a connection gets a resume put directly in the hands of the person with the power to hire. Sometimes the hiring is a foregone conclusion and the resume is merely a formality.
Buying in Bulk
A somewhat more trivial aspect of having wealth is being able to buy in bulk and to buy higher quality items that last longer. It may seem like a little thing, but little things add up. Having disposable income means you can spend money when prices are good and not only in moments of immediate need. It means you get to decide when to spend your money. When you’re living paycheck to paycheck, you can’t plan ahead; you can only buy what you can afford in the moment. Wealthy people have huge pantries filled with surplus items purchased when they saved money by buying in bulk.
When you don’t have enough money, you’re always forced to wait until the last minute to buy something necessary, to make a repair, to address a health issue—emergencies are always more expensive than preventative maintenance. This is true for healthcare, maintenance on your home, and maintenance on your cars. By being able to afford preventative maintenance, wealthy people not only save money, but they’re also healthier and more comfortable.
I think many people don’t fully grasp the money-making power of money itself. Money multiplies when you invest it. Money makes money, literally, as if dollars can copulate with other dollars and make dollar babies. From real estate, to direct private placements, to start-ups, to bonds, to the regular ol’ stock market, wealthy people diversify their cash across multiple investment vehicles and make money while doing almost nothing aside from maybe reading a prospectus.
The stock market averages a 7% return per year. Contrast this with inflation and the average annual wage increase for most Americans, each of which hover between 1-3%, and imagine how much very real income can be generated by sticking 5 million dollars into the stock market.
Economies of Scale
That 7% growth in the stock market looks a lot different when you have a lot of money to start with. 7% growth on $5 million is $350,000. By comparison, if you invest $5,000 in the stock market and get a 7% return, you earn only $350, barely enough to cover a copay for the local emergency clinic when your kid gets a sudden ear infection. And yet, for many Americans, $5,000 is a massive amount of money, a figure that seems almost impossible to reach by squirreling away a hundred dollars at a time here and there. When you can’t afford to buy toilet paper in bulk, “saving to invest” sounds like a literal fantasy. But to wealthy people, investing extra money is an obvious thing to do.
Wouldn’t you think that the money a person earns by sitting on their ass and doing nothing would be taxed at a higher rate than the money people earn via their blood sweat and tears? LOL no. Capital gains income—the income earned from the sale of an asset like real estate or stocks—is taxed at a lower rate than your regular income tax (unless you’re talking about short-term capital gains, which currently align with regular income tax brackets). Wealthy people know this, or can afford to hire people who know this, and they make sure to hold investments long enough to get that lower tax rate.
As much as we would love to believe in the purity of the American dream, we simply do not live in a place where reward is based on merit. We live in a world where connections matter and money begets more money. The ever-widening wealth gap is a symptom of this, and of how the many accumulated but not-so-obvious perks of wealth exacerbate financial inequality.