5 Traits of the Wealthiest Families, Explained: How Each One Works

Intro

Five traits of the wealthiest families, explained: for each one, what it is, how it works, the first step, and its limit. In one central bank's survey, it takes $2,539,200 of net worth to join the wealthiest tenth. Each trait comes from an official survey, linked below, and Henry only points at what it shows.

1. They plan to save most of a surprise

Number one: they plan to save most of a surprise. The central bank's newest survey asked families what they would do with a surprise equal to one month of usual income. It asks for three shares: what percent you would save, spend, and use to pay down debt. On average, the lower half of the wealthiest tenth would save 66.4% of it.

That is far more than families overall, and at the very top, the share saved is even larger. That lower half would spend about the same share as families overall. How it works: less goes to debt, a slice the researchers tie to how much families owe. The split is a plan: the share for saving is chosen before any money arrives.

An example: a surprise of $3,000 becomes 2,000 saved, 600 enjoyed, and 400 for debt. A deposit insurance agency's page shows the first step: knowing why and how much you want to save. The page says that knowledge can help you stick to a plan. The survey's own question works as a template: one share to save, one to spend, one for debt.

What it takes: knowing your normal annual income, since the surprise equals one month of it. Its limit: these are answers about an imagined surprise, not money that actually arrived. The researchers note evidence that answers like these align fairly well with real behavior. And the survey describes families in one country, so read it as a picture, not a rule.

Tax rules on extra income, and the accounts on offer, differ from place to place. Quick check for number one: annual income known, a reason to save, and three shares written down. If this helps, subscribe: every new list here shows how each item works, from official pages. Number two looks past the paycheck, at every other line of income.

2. Wages are only part of their income

Number two: for the wealthiest tenth, wages are only part of their income. The same survey splits each group's income by source, and the shares add up to the whole. Its lines are wages, business income, interest or dividends, capital gains, retirement income, and transfers or other. In the newest survey, wages were 42.1% of the wealthiest tenth's income.

For families overall, wages were a much bigger share of income. How it works: most of the rest came from businesses, capital gains, interest and dividends, and retirement income. A regional central bank's beginner guide says that by investing, you put the money you save to work. It defines an investment as anything you acquire for future income or benefit.

Investments can grow, it says, by generating income, like interest or dividends, or by rising in value. A markets regulator's page explains dividends: a company distributes some of its earnings to its stockholders. An example: wages of $3,000 and other income of 1,000 make wages three quarters of the total. The beginner guide's budget sheet shows the first step: each source of income on its own line.

With one paycheck, the sheet starts with one full line and the other lines still open. What it takes: savings to invest, and time; the guide says smart investors take a long-term view. It adds that they put money into investments regularly and keep it invested for many years. Its limit: the guide is plain that investing is not a get-rich-quick scheme.

And the regulator's page notes that no company is certain to grow and do well. The survey's table also shows shares of income, not how much any one family earns. Taxes on interest, dividends, and gains differ from place to place. Quick check for number two: income on separate lines, savings put to work, and a long-term view.

Number three is about the money that waits in everyday accounts. Number three: they keep a smaller share of

3. A smaller share in everyday accounts

their financial assets in everyday accounts. This one comes from another central bank, whose own survey also sorts households by wealth. Financial assets there include bank accounts, shares, investment funds, bonds, and pension plans. In its wealthiest tenth, accounts usable for payments hold 25.2% of financial assets.

For all other households, those everyday accounts hold a far bigger share. How it works: the parts add up to the whole, so less in everyday accounts means more elsewhere. In that survey, the top tenth hold more of their financial assets in shares and investment funds. A deposit insurance agency's page says stocks, bonds, and funds can produce higher returns than bank deposits over many years.

The same page adds that their value moves up and down with the market. An example: with monthly bills of $2,000, an everyday account of 5,000 holds 3,000 more than a month needs. The beginner guide shows a good first step toward saving: a savings account at a bank or credit union. Once there is a good savings foundation, it says, you may diversify among different types of investments.

The agency's page also says automatic transfers can keep savings separate from everyday money. What it takes: the agency's page suggests reviewing what you spent in the last few months. That shows what a month really needs, and how much is left over. Its limit: stocks, bonds, and funds are not covered by deposit insurance, the agency's page notes.

And like the first survey, it covers one country, so it shows a pattern, not a rule. Deposit insurance, account types, and their limits differ from place to place. Quick check for number three: the month's needs known, a savings account open, and savings kept separate. Number four is something many of them own directly, not through a fund.

4. Many own company shares directly

Number four: many of the wealthiest own company shares directly. A markets regulator's page explains: a stock gives its holder a share of ownership in a company. This one comes from a survey run jointly by central banks and statistics offices in many countries. It counts publicly traded shares as their own asset, apart from funds and private pension plans.

In the survey's combined results, 35.9% of the wealthiest tenth hold such shares directly. Among all households in those combined results, the share is far smaller. How it works: the regulator's page lists three reasons people buy stocks. A price that may rise, dividends from the company's earnings, and the ability to vote.

The regulator's page shows the first step: knowing the ways to buy shares. It lists a direct stock plan, a dividend reinvestment plan, and a discount or full-service broker. Some companies, it says, let you buy their shares directly, without a broker. The page also lists stock funds, which the survey counts apart from shares held directly.

And annual reports, the page notes, include financial statements checked by an independent audit firm. What it takes: money for fees, which the page says come with buying and selling stocks. An example: a $5 fee on a $100 purchase takes 5% before the price moves. It also takes time and a tolerance for risk, as a deposit insurance agency's page explains.

Its limit: prices move down as well as up, and money invested in stocks can be lost. The page adds that holding a number of different stocks can offset part of that risk. And in the survey of many countries, direct share ownership varies widely from one country to another. Rules for buying shares, and the taxes on them, differ from place to place.

Quick check for number four: the ways to buy, their fees, the annual report, and the risk. Number five is a savings product with a fixed end date.

5. Fixed-term deposits, over twice as often

Number five: they hold fixed-term deposits more than twice as often as families overall. A fixed-term deposit, a markets regulator's page explains, holds a fixed amount of money for a fixed period of time. Back in the first survey, 23.7% of the wealthiest tenth hold one. Among all families in that survey, the share is far smaller.

How it works: in exchange for that fixed period, the page says, the bank that issues it pays interest. When you cash it in, it says, you receive the money you originally put in, plus any interest. It is considered one of the safest savings options, the page says. The beginner guide lists it among insured savings accounts, each paying a different interest rate.

The regulator's page shows the first step: the disclosure statement, and what it is meant to cover. First the interest rate, and whether that rate is fixed or variable. Next, when the bank pays the interest, for example monthly or twice a year. Then the date the deposit ends, and any penalty for taking money out early.

What it takes: money that can stay put until the end date, since early withdrawal can carry a penalty. Its limit, the page notes: the risk is that inflation grows faster than your money. An example: if a deposit pays 3% while prices rise 4%, its buying power falls by about 1%. Deposit insurance, penalties, and taxes on interest differ from place to place.

Quick check for number five: the rate, the end date, and any penalty, all read before opening one. That is all five; here they are again, each with its first step.

Recap

Number one: they plan to save most of a surprise, starting with why and how much to save. Number two: wages are only part of their income, starting with every source on its own line. Number three: they keep a smaller share in everyday accounts, starting with a savings account. Number four: many own company shares directly, starting with the ways to buy them.

Number five: they hold fixed-term deposits more often than families overall, starting with the disclosure statement. Which of the five do you already have? Tell us in the comments. Results vary, rules differ where you live, and this is information only, not financial advice.

Next on Wealth Filings, watch three habits of the top 1%, linked on screen. Subscribe so you see the next list first.