The correlation between income and wealth.... (wholesale, buy, interest, money)

[AllenSJC]

How strong is the correlation between income and wealth (net worth) in the United States, on average?

I think it's not as strong as some people may assume, especially when you look at different age cohorts. For example, there are many retired Americans who have a lot of assets but don't have particularly high incomes, while there are many young or middle-aged adults who may have high incomes but not necessarily much in savings.

I would be interested in hearing people's thoughts, opinions, anecdotes, etc. here.

[mathjak107]

Real wealth comes from decades of capital gains and good investing.

That is what takes the little bits we do manage to save from our income and turn that into big amounts.

Big incomes with no savings mean nothing. Smaller incomes with savings can mean everything.

[cdelena]

According to a Minneapolis Fed Study, Table 4, Updated Facts on the U.S. Distributions of Earnings, Income, and Wealth - Quarterly Review 2631 - Publications & Papers | The Federal Reserve Bank of Minneapolis), wealth and labor income have a 0.27 correlation coefficient, i.e. income explains about 7 percent (0.27 squared) of wealth and vice versa.

[french paris]

It is more interesting to rent many houses than working for a employer.Having an inheritance..

[mathjak107]

I guess that pretty much confirms what i believe about the creation of wealth.

You can take that a step further too and that is being frugal and or cheap with out a plan for growing those pennies saved won't result in much wealth either.

A penny saved is a penny earned but it will always be a penny.

Many times those that live the life of a miser would actually be much further ahead spending more and investing better.

Like those who buy a new car and negotiate the best price ,the lowest finance terms and then trade the car back in to the dealer at a low wholesale value.

Grandma could have paid a higher price for the car, got a higher finance rate, sold the car privately for alot more money and come out way ahead of mr negotiater.

[french paris]

Originally Posted by AllenSJC

How strong is the correlation between income and wealth (net worth) in the United States, on average?

I think it's not as strong as some people may assume, especially when you look at different age cohorts. For example, there are many retired Americans who have a lot of assets but don't have particularly high incomes, while there are many young or middle-aged adults who may have high incomes but not necessarily much in savings.

I would be interested in hearing people's thoughts, opinions, anecdotes, etc. here.

You are right .It depends of relations between parents and children
.If the parents have lots of wealth they will help their children.They could not working because they would have the same income than workers

[NCN]

A fool and his money are soon parted.

[HomeIsWhere...]

Originally Posted by mathjak107

real wealth comes from decades of capital gains and good investing.

that is what takes the little bits we do manage to save from our income and turn that into big amounts.

big incomes with no savings mean nothing. smaller incomes with savings can mean everything.

this^

[french paris]

Working often give less money than speculation and inheritance lol

[mathjak107]

I would disagree. I do not think you can say that as a general rule.

While inheritance is the easiest way it is just as variable as anything else.

Overall speculators are as variable as a succesful surviving business can be.

Compounding gains on passive long term ingestments can really create some wild sums over 40 years.