In my many speaking engagements, I have had to ask the younger people who are just leaving school or still in school if their institution has started teaching “Money” as a subject. Sadly, I’m still getting the same feedback, which is, No!
I have never understood why we pay so much attention to money issues and the difference it makes. Yet, no institution has deemed it fit to create a curriculum and make it mandatory for all students to learn before they graduate. I believe it will make a massive difference.
While growing up, I had a friend whose parents were quite wealthy, and you could tell in everything he does.
From the way, he speaks to the type of clothes he wore and the different cars that bring and take him back from school. One notable difference he and I had was the topic of money and how it’s been generated and managed.
In one of our numerous arguments, I remember telling him that his parents had “Old Money,” and when I was going to make mine, it would be “New Money.” Let’s just say he didn’t like the sound, but I stood my ground.
Let’s get right into it by defining what these phrases mean.
What is Old Money?
For the large part, old money refers to wealth passed down from one family generation to another. In other words, inherited wealth.
When a family is said to have old money, we are typically talking about wealth that has been passed down from many generations. It can also be used to describe a social class.
Families with old money are those we consider as members of the upper class in society, more so than people with new money. The Rockefellers, Gettys, and the Vanderbilts are examples of old money families in the United States.
The Rothschilds and the Wendel’s in France. The Agnelli in Italy or any of the families mentioned in the movie “Crazy Rich Asians.”
What is New Money?
New money is used to describe individuals who did not inherit their wealth but created and earned it.
People with new money are often considered to be self-made millionaires and billionaires.
In the social status cadre, new money owners are often pegged by a standard or level below the upper class where the old money owners belong, probably due to the length of existence of the wealth in question. The term lower-upper class is usually used to describe them by some people.
New money is mainly found in occupations such as technology, sports, entertainment, and others. These include tech billionaires, athletes, movie and tv stars, and anyone who got wealthy from a business they started.
What are the Critical Differences Between Old and New Money?
The most significant difference between old money and new money can be narrowed down to the source of the money, spending habits, and social perception.
Source of Wealth
The source of both versions of wealth is the easiest way to identify old money and new money. As mentioned, old money is wealth passed down through generations, while new money is recently earned.
For example, in the United States, most old money families are descendants of early industrialists. In contrast, new money is found from recent inventions of innovative technology, entrepreneurs, and entertainers.
No set number of years can determine if wealth is old money or new money. Instead, other differences can always help categorize a family’s wealth as either old money or new money.
Another crucial difference between old money and new money is the matter of social standing. Old money has more than just being passed from one generation to the other.
Old money families value the importance of education; they are refined, respectable, and often found in the Northeast.
Conversely, new money families have lots of grass-to-grace stories. They are families that did not always have the wealth. Instead, they are families that worked smart and hard to create their wealth through business, entertainment, and technology.
New money is often associated with the West Coast. Also, while families with new money might be as affluent as their counterparts with old money, they are still not referred to as members of the “upper-class.”
One vital distinction between old money and new money is how their wealth and spending habits impact their lifestyle.
Traditionally, families with old money are often modest and frugal when it comes to spending.
They grew up believing that their money is not for them as individuals, but it belongs to the family; hence, they need to spend it wisely. Additionally, they are saddled with the responsibility of passing the wealth onto the next generation.
Having said that, it doesn’t mean they don’t spend extravagantly; they do. From time to time, you will find family members who are reckless spenders.
However, they spend more practically and see large purchases as investments instead of extravagance for the large part. So, they live in inexpensive homes, drive nice rides, and buy luxury homes in choice areas.
When you think of the spending habits of new money families, it is vastly different from the former. Families with new money mostly see their wealth as theirs’s to enjoy rather than something to pass on to the next generation.
New money families often spend frivolously. It is commonplace to find them acquiring flashy homes and luxury cars just to show off their wealth.
Check the tabloid and other articles; it’s littered with families with new money who have gone from being extremely wealthy to being homeless within a short while.
For example, guys like Mike Tyson, Dennis Rodman, 50 Cent, and Nicolas Cage went from being top in their careers and having millions of dollars to being broke within a few years.
The change in their fortune can be traced to their spending habits.
Another primary difference between old money and new money is their investment approach.
New money focuses on here and now. They believe now is the best time to make money when it’s hot when they have the competitive advantage to cash in big time. As a result, new money takes a higher risk for higher returns when investing.
On the flip side, old money focuses on forever. It doesn’t care much about rapid return; instead, it prefers steady and consistent returns. They like to move at turtle speed, ensuring along the way that the wealth keeps growing even after they are gone.
Trend vs. Traditions
With old money, their spending and lifestyle are pretty much set in stone. They stick with legacy brands; they rarely change from their traditional hotels, resorts, and brand of cars.
Old money families do the same occupation their parents did; their kids attend similar schools when they are well known.
New money, on the other hand, is bold, wild, and adventurous. They are attention seekers and don’t want to be left out of a current trend. So, while old money invests in commodities like gold, new money intends to explore the cryptocurrency trend.
Loud It Up
Old money families don’t always talk about how wealthy they are. They don’t want to be treated differently. But, when it comes to new money, the world must know their net worth. The louder it is for new money, the better for their ego.
While old money is playing golf, new money is sitting front role in the court. So the attention must be on them. They can buy a pink Ferrari today and get another in a couple of days only because they like Flamingo.
We can go on with several differences, but the question is, what does it matter if it’s old money or new money?
New Money or Old Money – What Does It Matter?
It depends on your perspective. However, here’s my view.
Families with old money often take pride that wealth has been transferred to them, and they intend to do the same. So, if you are born into a family like this, your future is as good as covered financially.
It further shows that your family has a culture of wealth management that includes sustainability. That is a good thing.
However, look around, and you will see that majority of the world’s millionaires and billionaires today are self-made. From Bill Gates to Jeff Bezos, the list is endless. These guys became billionaires and famous by creating their businesses from the ground up.
While they may not fall into the social standing of the “upper-class,” they take pride in the fact that they created their wealth with their own hands.
Now to the crux of the matter. One crucial difference between old money and new money we mentioned earlier is spending habits. It’s that important to repeat because this will determine if your wealth will be transferred or dissipate right before your eyes.
Old money families have cultivated the habit of wealth management and living within their means. Even when they don’t have new means of wealth coming into their enterprises, they find a way to manage what they already have so it can last beyond them.
Frivolous spending habits are an “anti-wealth” creation habit, which is quite common with new money. So, this is something new money families can learn from the old money guys.
There’s nothing to be ashamed of to be referred to as a new money family, but it’s essential to understand how the old money has sustained their wealth. The old money families too can take a lesson from the new money family on wealth creation.
My takeaway from all of these is not the status of old money or new money; instead, the lessons from both sides. Old money has the experience of wealth management and transfer which is valuable to everyone interested in making money and sustaining it.
On the other hand, new money offers us insight into the lives of billionaires who grew right before our eyes. Their stories and processes are there for us all to relate to.
We consume the products that come from their companies, and we have the satisfaction of being part of their wealth. So, if you can, find a way to merge the lessons from the two worlds and do better.
We value your opinion and comments, as always. So, let’s talk.