Just writing something short that came to my mind:
I was having a meal with my family awhile back and one of my aunt mentioned that the rich would get richer and poor will stay poor because the rich have so much capital to grow.
I do agree to a certain extent as my cousin who is pretty rich, is able to use a larger amount of his money to invest as compared to me and people his age.
This is because he has a much higher allowance given by his parents and he need not worry about making losses as money is not as important to him.
For me, I am having a large portion of cash on hand as my mum recently resigned from her job and I feel that I need to have cash around just in case.
Hence I am not willing to invest my money as I feel more secure with more cash on hand.
My cousin on the other hand does not need to worry as his mum has passive income and is able to lead quite a comfortable lifestyle.
He usually invest in US stocks as he trades. He is also more likely to take on riskier decisions as money is not of that much priority to him.
Of course, money is of different significance to different people and I believe that each individual would have their own way of valuing money.
What your aunt observed is a fact of life. The rich do get richer unless they meet with unfortunate events in their lives.
ReplyDeleteHere are some examples of everyday things in life where the rich have clear advantage over those who have less:
1. When buying a home, the rich would take less or no home loan, thus saving them significant interest cost, while those with less money would have to take on and shoulder a home loan for many years. If you take home loan over 30 years, the total interest you pay could easily add up to the cost of another home! For the rich, that would mean that they would be able to buy another home, while the less rich person is just paying up for the first home!
2. The above observation is also true when buying cars. The rich can pay outright for a new car, while the less rich person would have to take loan and incur interest cost for the car. Ironically, the same car ended costing more to the less rich guy because of the interest cost.
3. The rich gets to earn more interests because they can afford to buy bonds that are only available to people who can afford the minimum investment amount of $200,000 at a go.
4. Even DBS multiplier account favours the rich. They can afford to keep $100,000 in their multiplier account to earn the maximum 3.8% interest. For a working rich couple with a joint account for their salary crediting, and meeting the qualifying conditions, they can easily earn $600 to $620 interest a month combined without a sweat. This amount can enable them to pay for the maid's monthly salary for example.
Our commercial world is somehow structured to reward the rich.