Is the Ability to Make a Lot of Money Inherited — or Learned?
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It is a truth universally acknowledged that the offspring of wealthy parents tend to become wealthy adults. However, the reason behind this phenomenon has been a little less clear: Is it nature, i.e. have rich kids won a literal genetic lottery? Or nurture — has the environment they’ve grown up in paved the road with gold?
According to a new study out of Sweden, we now have an answer: nurture trumps nature in determining a child’s future financial status.
Researchers merged administrative data from several different sources, like the Swedish multigenerational register and the Swedish Wealth Data, to determine the net wealth of 2,500 Swedish kids adopted between 1950 and 1970, as well as the net wealth of their adopted parents and biological parents. Sweden used to have a wealth tax (abolished in 2007), so numbers indicative of parent and child’s financial status were pulled from government-collected data between 1999 and 2007.
When comparing the wealth of adopted parents and biological parents to their child’s eventual riches (or lack thereof), the researchers discovered that environment plays a far more substantial role in determining future wealth than biology.
This result held before any inheritance was passed down from mom and dad — but as you can imagine, having wealthy parents bestow their empire on you doesn’t exactly hurt a kid’s odds of financial success either, according to Kaveh Majlesi, PhD, an assistant professor in the Department of Economics and Knut Wicksell Centre for Financial Studies at Lund University in Sweden. “[In the study], we also examine the role played by bequests and find that, when they are taken into account, the role of adoptive parental wealth becomes much stronger,” Majlesi tells Yahoo Health.
While most people could have probably guessed environment has some influence on a child’s eventual financial status, this study hints at just how strong that association may be. “I doubt that anyone could have put a specific and exact number on it,” Majlesi says. “We find that, even before any inheritance, around 70 percent of the intergenerational link in egalitarian Sweden is due to nurture.”
Majlesi cautions that his team’s study should be “interpreted cautiously,” as the mechanisms of wealth transmission are merely suggestive and the study was conducted solely on Swedish citizens. “But our results support the idea that children develop similar kinds of preferences as their parents,” he says. In other words, kids are prone to adopt the goals and behaviors of parents raising them — financial or otherwise.
The takeaway lesson, says Majlesi, is that “there is a lot of room to affect people’s wealth accumulation by changing the environment they grow up in.”So, essentially, no one’s financial fate is genetically-sealed. Parents modeling a strong work ethic, and racking up wealth, are likely setting their kids up to do the same.
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