Are 80% of Millionaires Really First Generation? Here Are the Updated Stats!

it's brian preston the money guy talk about this one all the time a lot of you out there in the money got family you've heard me say this before but i think it is so worth repeating because it is counter to what the the narrative we hear in so many places right now but number seven is 80 of millionaires are first generation now what i love about this statistic brian is it's sort of freeing right it was because i did not come from wealth i did not come i came from very humble beginnings i know you are the same and when i hear that eighty percent of millionaires are first generation i hear man this is attainable in the place in which we live anyone has the opportunity to work hard put the time in figure out the three components of wealth building and anyone can be a millionaire i think that's an incredibly encouraging thing well i like it because it is motivating you too can do this but also a lot of people might be looking at this and go yeah but is that a stat that you pulled from the millionaire next door and that book was written in the mid-90s so maybe this is not timeless i'm telling you this is timeless because we've actually seen the research on this and think about this guys in the next millionaire next door which dr sarah you know who's thomas stanley's daughter continued his research on she published in 1892 they found in their research 84 percent of millionaires were first-generation forward to 1996 i've already told you the millionaire next door came out with the 80 stat and then you've got ramsey solutions has come out in 2019 it was 79 and we even do our own wealth study of our own personal you know millionaire clients at abound wealth and the stat came in at 77 that is too much to call it a coincidence that all these different sources say first generation people did not come from money they they kind of started building and saving and that's the other part that's not on this stat i know it from my own research the majority of these are not entrepreneurs the majority of these are not big tech executives the majority of these are not the virtuosos that are on the the basketball court or the football field or playing an instrument the majority of these people we're talking about are diligent savers just like you now what i think is so interesting is this statistic about 80 percent of millionaires are first generation it was incredibly motivating to me early on and got me so excited about how level the playing field was and how we'd have the ability to end up getting there but now as i've had some success in life as we've had some success in business there is a dark side to that there is a negative to that and for the statistic to be true for hundreds of years here that 80 percent of millionaires are first generation that must mean that wealth disappears quickly and this is what we know that 70 of wealthy families lose their fortune by the second generation and then by the third generation 90 percent of wealth is why it's a natural cleansing process that's that happens and and this is why guys if you if you come from a family of wealthy parents please change this stat don't you know if you are if you are successful and you're raising children pay attention to these stats too because guys i want us to change this because i think it's the saddest thing out there because what if instead of these people consuming the wealth that was created before them they use this to for the better good that they used it for generosity they used it to grow something they got bigger and bigger because success doesn't mean you took from someone else success means that you actually grew the guy bigger and that's the part that bothers me about this generation the whole generation loss of wealth between second and third is that man there's just the opportunity cost is bad so that's why here's the challenge for you ask yourself am i a wealth creator or a wealth consumer and i think if you'll look at it in that type of mindset it will help you with that decision-making process especially you come from a family of means because if you find that you're consuming the wealth rethink that you should change the cycle all right so this next statistic brian i think this one um i think this one allows us to take some pressure off because again we live in this social media world where we see the fancy cars and the big houses and the young people with the fancy watches and the fancy clothes i thought that this was sobering but sobering in a comforting way that most people don't become millionaires until age 49. this is the stat that actually created this show because i i was driving home and i was just thinking i mean this is my brain works in weird ways but i was like man i just wish more people knew that the typical millionaire hit that at age 49 because and there's so much to unpack from that number of 49 is because when do people graduate college they graduate college around 22. that the difference between 22 and 49 is approximately 27 years of investing when i look at the power of compounding growth it's not the first five years of investing it's not the first 10 years it's the it's after that money has had the time of staying and percolating and growing it's after 20 25 years that you start seeing that compounding growth get it's like a magical formula like when you're making a cake when you put the eggs you put the butter you put the flour you know it smells good and you put the sugar don't forget the sugar you know it tastes good but something about when you put it in the oven and then watch it rise and then there's something from a chemical standpoint that is going on the same thing happens with money if you can get those components of if you think about discipline money and time all together it makes that big beautiful financial you know cake that you can smell permeates your entire life and it just makes you happier and more fulfilled too one uh you just made me incredibly hungry and two i agree but don't just take our word for don't just take our word you know that uh 49 is the average look at the actual numbers we had fted pulled this together for us i'm going to show you the power of time what happens if i invest 500 a month over different lengths of time and why don't we pick 500 a month that's just max not a roth ira right now six thousand dollars a year and this is what we thought was so interesting if you do that for five years at the end of that five year period about 18 of your ending value would be growth it doesn't visually we have a chart up right now for all of our podcasts you don't even see the growth because it's just not as big enough portion of it uh if you were to do this for 10 years at the end of the 10-year period about 34 of your ending portfolio value is growth i'm starting my eyes remember i'm getting those eyes of a 50 year old that are starting to go away so it's um i can barely see the sliver of growth but that's not even telling the full story if you do this for 20 years there it is 59 of your total portfolio allows for growth 59 of the value of your army of dollar bills is not from soldiers that you put in the army it's from recruits that those soldiers went out and grabbed it's from your army of dollar bills growing so here's what i think is so interesting because it's easy after you especially somebody who's in their 20s who starts doing this after you're gonna look back in five years and go is this worth it you know i feel like i'm sacrificing a portion of today am i am i really getting something out of this and then you fast forward five years and now you're ten years of being a saver and investing you're like okay i see a little bit but i just don't know this doesn't feel like it's overwhelming i feel like i'm putting more in i'm getting out of it so maybe i should be living more for the day and this believe me there's enough voices out there in the marketplace that are telling you that but if you can just keep putting it in keep letting it do its magical thing at year 20 you can see 59 of the account value more than you put in is actually from the growth not from you saving and investing and then it gets even bigger because look at that 30 years in now of your total account value 76 is growth you're only putting in 25 or 24 of the total account value and then what happens at 40 bo at 40 over and let's assume this is an entire working career 40 years you've been in the workforce if all you did was just do the 500 a month for that 40 years at the end of that 40-year period 86 of the account value would be growth 86 would be money that was created while you were sleeping while your army of dollar bills was working for you it's unbelievable if you can just give it time to do what compounding interest does

Channel: The Money Guy Show

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Keywords: money guy show, debt, budget, cash, real estate, insurance, how to make money, save, credit card, compound interest, buying house, buy stock, success, personal finance, Are 80% of Millionaires Really First Generation? Here Are the Updated Stats!

Id: zIOxVKDFkG4

Length: 9min 0sec (540 seconds)

Published: Tue Jul 27 2021