“Inheritocracy” by Eliza Filby discusses the role inheritance plays in the lives of children and adults. Many believe we live in a meritocracy; however, accessing merit without The Bank of Mum and Dad is tough.
As the cost of living has increased dramatically following the Great Recession in 2008, kids with access to The Bank of Mum and Dad have pushed ahead faster than those without.
Consider a young adult who can take an unpaid internship because Mum and Dad are paying for their living expenses. How about a couple that can live in a home rent-free for the first ten years of their marriage? Are they more likely to start a family?
The Bank of Mum and Dad has proven to be a standout feature of a successful life. The author does a beautiful job of detailing her experiences in her 20s, living life with some assistance from her parents.
The Bank of Mum and Dad comes in many shapes and sizes, but almost any assistance helps. However, those entering their adulthood without help are increasingly being pushed out of the wealth-creation phase of life. They can stay in the “struggle” stage perpetually.
1) All parents must focus on what they can do for their children now. Young adults who receive some of their inheritance early in life are much better off than waiting until the end.
2) The Bank of Mum and Dad can include expensive things like college tuition, cars, and homes, but it can also include childcare, living at home, information, contacts, and references.
3) College education plays a vital role in today’s youth; however, without the Bank of Mum and Dad, these adults can still fall far behind others with help.
4) Parents and children must consider the effects of elder care. Without taking the necessary precautions, elder care can take older adults’ pensions, investments, and homes. This can wipe out any inheritance for the children.
5) Adults without the Bank of Mum and Dad must work three to four times harder than those with support. However, they must also be three to four times more disciplined and intentional with their resources. They live in a zero-sum world.
My main takeaway is that parents must consider all elements of their children’s lives early on. This means they should have a “soft” plan for their kids until 40 or 50.
For example, purchasing a second home can help their kids in multiple ways. Starting an investment account in the children’s name can also be a boon for the kids’ retirement plans.
In a meritocracy, everyone working hard from age 18 would eventually earn a great job, a home, and a family. We do not live in those days any longer. Hard work is still necessary; however, those with resources (houses, cars, investments, contacts, businesses) will have leverage early and often in life.
Living in an inheritocracy is “not fair” for everyone, but parents must see the writing on the wall. They are the primary determining factor on whether their kids will be successful or not.
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