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Most of us are probably familiar with the phrases old money and new money and how it pertains to a family's wealth. But how many of us know what those labels mean?
Old money and new money aren't just about the source of someone's fortune. Instead, these terms describe a set of expected behaviors and habits.
The way that people perceive how you spend your money may determine what category you fall into. In this article, we're going to take a look at what defines old vs new money.
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What Is Meant by Old Money vs New Money?
Before we can look at how the actions of old money and new money differ, we need to define exactly their definitions.
Old money means money that is inherited. If someone has old money, it likely came from parents or grandparents. Old money is money that passes from one generation to the next.
New money is money that you earned. New money was not given and didn't come from any source outside yourself. Usually, new money refers to someone who went from low income to high income.
Old Money vs New Money: Why Care?
Maybe you're wondering why the distinction between old and new money matters. The answer is that you can learn a lot from the spending habits of different people.
Regardless of your financial standing, taking a peek at how other people use their money may teach you valuable lessons. As we progress through this article, you'll learn how people with both new and old money tend to spend.
Hopefully, you'll find some worthwhile tips and information that can inform you about how to progress on your financial journey.
Old Money vs New Money Behaviors and Habits
There is no exact rule book to distinguish how people from old or new wealth are spending money. But there are some general distinctions that each group tends to follow.
Some of the most common generalizations are that new money is more obvious and ostentatious – while old money is refined and harder to detect.
We're going to look at a few ways people with old and new money tend to differ.
Wealth Source
The most glaring difference between old and new money is the source of the wealth. People with old money receive their fortunes from at least one generation prior.
Old money is inherited wealth and often comes from family businesses or investments. Some examples of old money wealth sources would be the Walton family (Walmart), the Rockefeller family (oil and gas), and the Hilton family (hotel magnates).
New money, as we mentioned above, is money that was directly earned. Most of the publicly wealthy people we see today are new money. Think about a famous celebrity or professional athlete- one of the most notable being Bill Gates. These people are perfect examples of someone who is new money.
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Perception
An individual's wealth is viewed differently depending on whether it is new or old money. Many old money families are well-educated and don't publicly flaunt their wealth. They live in areas known to cater to the rich such as the Hamptons or Upper Manhatten.
You may have heard someone mention the old money aesthetic before. Usually, this refers to a classic and refined look – this generalization clashes with the new money aesthetic of wearing branded clothing or large noticeable jewelry.
Habits
Old money vs new money habits differ just as much as the aesthetic. New money habits involve people spending their money more carelessly. Someone who is new money may participate in spontaneous spending sprees. New money may also take more vacations and splurge on first-class tickets.
Old money habits usually involve scheduled and well-thought-out activities. People with generational wealth are less likely to spend spontaneously. An old money family places practicality above convenience. People with old money spend their time attending high-class social events and participating in less accessible activities like polo or sailing.
Leisure and Hobbies
Another distinguishing factor between old and new money is how someone spends their leisure time. Old money tends to plan leisure meticulously. You can find people with old money attending dinners and hosting events on the regular.
Hobbies of old money are things that are far too expensive for the average person. Old money loves the prestige of hobbies like dressage or boating. The expense of these hobbies keeps them out of reach for the middle class. A high cost of entry ensures that these hobbies remain only for the most wealthy in society.
New money families are laxer in their leisure time and hobbies. New money may find themselves diving into interests they previously held, but on a whole new level. For example, new money might decide to start buying cars or expensive gadgets.
Spending and Saving
Spending and saving patterns of old and new money mindsets are miles apart. New money is known for spending lavishly and spending often. People with new money may say things like, "spend it while you can." The rags-to-riches story often associated with new money makes people want to show off what they have earned.
New money is also not as financially literate as old money. Saving or investing might happen, but it is on a much smaller scale. While new money people fund their 401ks, old money opens multiple brokerage accounts.
Old money families tend to be much more frugal-minded. This mindset comes from a more communal sense of who the money belongs. Old money is family money. It is meant to span generations – therefore, it cannot be spent willy-nilly.
The financial education in old money families begins when they are young. A person inheriting old money will have the knowledge and resources to protect and grow their wealth.
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Investment Style
The investment style of old and new money varies widely. Old money investments are generally safe and long-term. However, it's more common for old money to have a broad investment portfolio that includes a mixture of stocks, bonds, and real estate.
New money investments are often more speculative and risky. Because new money is new to investing, there's a learning curve to overcome. People with new money may not know as much about investing. This lack of a financial foundation often limits them to investing less broadly.
Philanthropy
Philanthropy is a huge part of both old and new wealth. Old money is heavily involved in philanthropy. Most old money families have foundations that employ workforces to run their charity. For example, consider the longstanding Carnegie Foundation or the MacArthur Foundation. In total, old money families give hundreds of millions to good causes every year.
New money isn't shy about donating either. People with new money have more targeted giving habits. New money loves to donate to local causes. You'll find that celebrities and athletes will open community centers or scholarship programs in their hometowns.
Trend and Tradition
It should be no surprise that new money follows trends while old money follows traditions. In old money families, it's common to see children grow up to take over roles in family businesses and foundations. Old money also places heavy importance on alma maters. Some old money families have generations that all attend the same prestigious university.
New money is more susceptible to new and trending things. For example, you can probably think of at least three celebrities with health and wellness companies. That's because health and wellness are trendy! The new money will follow recent trends in an attempt to capitalize and grow their wealth.
Values
The values of old and new money tie in closely with the source of their wealth. People from old money honor family values and traditions to the extreme. Someone that comes from old money may disregard their wants to fulfill their role within the family.
New money has values that align more with who they are as individuals. Someone with new money will value their wants and instincts over those of a collective. New money tends to take more risks because they rely solely on how they feel about things.
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Maintaining and Growing Wealth
Unfortunately, it's much more common to see someone with new money mishandle their wealth. We've all heard the stories of famous people who go bankrupt after their careers fizzle out. Most of this is due to a lack of knowledge about their wealth. New money is quick to spend and less quick to invest. The trend-following often leads to bad investment decisions.
Old money comes with built-in maintenance and growth mechanisms. Because old money has been invested across generations, there's not much need to try new investment strategies. And like we mentioned before, old money is much more frugal with their spending choices.
FAQs
Here are some commonly asked questions about new money vs old money:
Is There Tension Between People With Old Money vs New Money?
There isn't always tension between old and new money. But there is judgment. Each group is likely to judge the others for the choices they make. For example, old money may see new money as gaudy or tactless. New money might judge old money for being stuck up and arrogant.
How Many Generations Are Considered Old Money?
No set generations of wealth are passed down to establish it as old money. Instead, just one generation is enough to qualify money as old as opposed to new.
What Are Common Ways New Money Achieved Their Wealth?
Some of the most common new money comes from celebrities. Celebrities are almost exclusively new money. Currently, tech millionaires are rising and make up a sizable portion of new money.
The Bottom Line
Old money and new money isn't just about the source of your wealth. Instead, it's a set of habits and values that determine whether you'll be classified in either upper-class group. For example, old money has a reputation for being quietly refined, while new money is the opposite.
One thing we know for sure is that old money spending habits are a sure way to guarantee that your wealth lasts for generations.
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