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New Money Vs. Old Money

The concept of New Money vs. Old Money is often misunderstood. What is the difference between New Money and the money that came before it? Does this refer to the previous “currencies” that our economy once used? Or is there more to it than this? 

What is Old Money? 

The best way to understand old money is the money of your parents or grandparents, and new money is money that you generate – partly. 

Old money is the money that passes from generation to generation, otherwise known as generational wealth. Families with a large amount of generational wealth or (old money) are often considered the upper class of society. Not because passing money from generation to the next is so cool, that suddenly we respect them more, and boom, they form part of this elite upper-class group. No, these groups often just have such large amounts of money that they are usually found in the upper class.   

Some classic examples of people who live off old money are The Rockefellers, Gettys, and the Vanderbilts, from the United States. Or The Rothschilds and the Wendel’s from France.   

What is New Money?  

New money is money that you have worked for and generated yourself. While these people still have the potential to become ultra-wealthy, they themselves are the reason they now have access to this wealth. Surprisingly enough, 75% of the Forbes billionaire list are people with new money.  

This is a good thing, as numerous studies have shown that generational wealth might not be the best thing for the individuals receiving the wealth.  

An old saying goes, bad times create a strong man, and a strong man creates comfortable time. Comfortable times make weak men, and weak men create bad times, restarting the cycle.  

While this isn’t always the case unless the parents go out of their way to teach their children the lessons they had to learn while acquiring wealth. This cycle is doomed to take place. 

What can we do about the cycle? 

The first step is education; if possible, billionaires should mentor their children by creating their own wealth and thus understanding what it takes to become wealthy. The children would then become wise and influential people.  

Some of the mega-rich, such as Alex Hormozi, have spoken about this cycle and have come up with a few solutions to this first-world problem. Granted, they are pretty extreme, and if they ever come to pass would cause a significant backlash. 

Alex speaks about ending the ability to pass wealth to your predecessors when you die, with possibly the exception of your wife. When your ticker stops ticking, all your wealth gets split to charities worldwide.  

What about taking care of your family?  

This new way of handling money that gets passed on from one generation to another makes it essential that you teach your offspring about managing and running a business. It switches the goal from “making as much money as I can so they don’t need to worry” to “I need to spend as much time with my children as possible, so I can mentor them on how to continue adding value once I’m gone.”  At the end of the day, that’s all wealth is, the amount of value you provide the world. 

This new way of doing things will also cause people to become increasingly more generous as they continue to age. This may likely inspire them to invest in more people’s businesses, which gives more entrepreneurs the opportunity to make the world a better place.  

Chances are, the people in power will never pass Alex’s suggested way of handling death, but it is a fun thing to consider. What do you think of this new way of disrupting the old money versus new money way of thinking we have had for decades?

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