While being ultra-wealthy is a dream for many — for some who are, certain differences in how they attained their wealth — and how they choose to spend it exist.
“The Great Gatsby,” F. Scott Fitzgerald’s novel, perhaps best encapsulates the divide between the so-called “old money” and “new money.” While new money — such as Gatsby’s — might conjure images of flashiness, frivolity and overspending, old money — that of Daisy and Tom Buchanan — is often associated with more subdued and conservative ways of spending and showing it.
The old money versus new money distinction generally delineates between individuals or families with inherited wealth and status, versus those who have acquired it more recently through entrepreneurship or business success, said Peter Earle, senior economist at American Institute for Economic Research.
“Old money typically comes from inherited wealth passed down through generations, whether the original source might be long-held holdings of land or the founding of some industrial concern,” he said.
By contrast, new money usually originates from entrepreneurial ventures, successful careers, or innovative business endeavors that lead to rapid accumulation of wealth within a single generation, he said.
Does It Make a Difference for Rich People?
Mariano Torras, Ph.D., professor and chair of the finance and economics department at Adelphi University, said that modern wealth is far from monolithic and that there are important differences among today’s very rich, between so-called “old” and “new” money.
“Calling it class conflict might be a stretch, but they frequently do not identify with each other,” Torras said.
Old money mostly comes from inherited wealth, which is often multi-generational — sometimes even dating back to the Old World aristocracy.
“Old money dresses conservatively and is generally far less flamboyant than “new money.” Many in the former group form part of the social elite with their attendant Ivy-league degrees,” he said.
Meanwhile, he added that new money is much more often “self-made,” whether through speculative investments, entrepreneurship, celebrity or professional sports, for instance.
“Even though this group includes some of the world’s richest people, most members are not considered “elite” and may or may not possess an advanced degree,” he said. “New money is often flaunted and it is this ostentation — known sometimes to make “old money” indignant — that is probably the most distinguishing feature between old and new wealth.”
Yet, other experts argued that this social distinction has become less meaningful over time.
“Financialization, entrepreneurship and an increasing social appreciation for merit and achievement have diminished its importance in contemporary society,” Earle said.
What Are the Contrasts?
Beyond the source of their wealth, there are additional contrasts between old and new money, namely in spending and saving habits.
“The rags-to-riches story often associated with new money makes people want to show off what they have earned,” according to a Myra Wealth blog post. In addition, new money might also not be as financially literate as old money, according to the post.
On the other hand, old money families tend to be much more frugal-minded — a habit stemming from the fact that this is family money accumulated over time and generations and hence, cannot be spent carelessly, according to Myra Wealth.
In other words, conservation and prudence on one hand and bold spending on the other, as Swiss Money puts it.
Yet, that’s not to say that members of new money don’t invest.
“Famous celebrities, athletes and businesspeople often invest in real estate or buy companies to increase their wealth,” according to an article on Sofi. “Generally speaking, new money might make riskier investment decisions for faster yields. They’re not thinking about generational wealth to protect with tried and true investment methods.”
Different Paths, Same Destination: Prosperity.
Erik Severinghaus, co-founder and co-CEO of Bloomfilter, said what he calls “class division” among the wealthy is akin to a “high-stakes game of social chess.”
“Some old-money families might stick to their exclusive clubs and traditions, while others welcome new money with open arms,” he said. “And some new money hustlers might work extra hard to prove they belong among the elite, while others couldn’t care less about fitting into old-money circles.”
According to him, whether you’re old money, new money or somewhere in between, it’s all about how you play the game.
“Wealth is just a piece of a puzzle; what matters is how you use it to make a difference — whether in your own life or the world around you,” he said. “From lineage to hustle, the journey to riches is as diverse as the people who embark on it.”
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Source: New Money vs. Old Money — Does This Make a Difference for Rich People?
