Old Money Vs New Money [Explained] - Arrest Your Debt (2024)

Do you think old money is better than new money? What’s the difference between the two?

In the most simple of terms, old money is money that has been around for a long time and new money is money that was created within the last few years. However, we’re not talking about the printing process. We’re going to discuss generational wealth (old money) versus newly created wealth (new money).

In this blog post, I’m going to talk about both types of money and compare them.

Understanding New Money And Old Money

The dichotomy between New Money and Old Money is a fundamental element of social understanding. It is a field of social science study of human relationships. It is just as essential as the generational dichotomy between old and young, between men and women, between urban and rural, between educated and uneducated, and more.

What Is Old Money?

Generally, “Old Money” is a reference to a social class commonly known as the “upper class” or “privileged class.” It is usually associated with inherited wealth or generational wealth.

The European Concept Of Old Money

In Europe, particularly England, the concept of Old Money has to do with lineage, peerage, and nobility as much as money or wealth. The English concept of the Old Money social class was comprised of nobility and landed gentry.

The peerage class was created in a middle-aged feudal society. The monarch owned all acres of land within the realm. But the monarch needed to maintain his power. To do that, he gave out peerage titles and bestowed vast acreage of land to parties with local power status in exchange for their loyalty. These noblemen made large fortunes off their land by either working the land themselves or leasing it out.

The Gentry Class originated with land ownership and was known as the landed gentry. The landed gentry was just below the peerage class in the feudal hierarchy. The peerage class sold some of their lands to the gentry to raise funds as well as assure the loyalty of influential gentry within their fiefdom.

Peerage titles as well as land were distributed by inheritance, but not widely since it normally passed to the eldest son. The nobility and landed gentry class was the source of “old wealth” in Europe. Usually, they didn’t work. Instead, they earned their money from rents. Much of this land is still in the hands of the peerage and landed gentry class descendants.

Old Money Privileges

But the privileges of the “old money” class in Europe and Great Britain are not exclusive to wealthy descendants. There are examples of bankruptcy among the “old money” class. For example, in England, there are poor “old money” folks. Some own large estates and mansions, which they open for tours to make a living. But, they don’t lose their privileges or social status just because they lose their wealth.

Some members of the “old money” class in Europe did not start as “old money” by inheritance. For example, the Rothschild family started out as Jewish bankers in Germany. The Rothschild family traces their ancestry to Mayer Amschel Rothschild (b. 1744).

Then, Christians were forbidden to lend money because usury was sinful. Instead, they used Jews as straw men to carry out commercial and lending businesses to increase their wealth. These so-called court Jews or court factors were compensated with elevated social status and privileges (even noble rank) and often a piece of the action.

Mayer Rothschild used his position to amass great wealth. At the time, he would not be considered “old money” because he was neither nobility nor landed gentry. But the European concept of “old money” evolved with the industrial revolution and the increased importance of finance and banking business.

Today, the Rothschild family is most definitely considered “old money” and among the richest families and prominent money families in history.

The American Concept Of Old Money

American “old money” did not to any large extent derive by inheritance of European “old money.” America has no peerage class. There came to be a landed gentry only after immigrants got here. For the most part, Europeans came to America to build their wealth on their own.

In the South, wealth was accumulated in an agrarian society by the use of slavery, not unlike European feudal serf labor on “old money” land. In the North, wealth was accumulated by merchants, shippers, and industrialists. European “old money” would look down on the colonial new wealth.

American “old money” is generally inherited money. We have no nobility class. Some but not all American wealth is traceable to the rural South (i.e., America’s landed gentry). More likely, America’s “old money” is traceable to industrialists and bankers. American descendants of colonial and industrial revolution wealth would be justifiably considered “old money.”

Examples of American “old money” include industrialists or ‘robber barons’ like John D. Rockefeller (oil), Andrew Carnegie (steel), Cornelius Vanderbilt (shipping and railroads), John Jacob Astor (fur trade and New York real estate), Thomas Mellon followed by son Andrew Mellon (banking and industry), among others.

These were self-made millionaires starting without much inheritance. They would not be considered “old money” in European “old money” society. But they went on to endow many major philanthropic foundations. They went on to be recognized as America’s “old money.”

Does Old Money Still Exist?

The first American multi-millionaires left descendants who inherited great wealth even after their ancestors gave away much of their wealth to philanthropic organizations. That wealth has been distributed, in some cases diluted or dissipated among multiple generations.

The survival of “old money” wealth among generations of heirs depends on what the heirs do with their share. In some cases, heirs have taken what they inherit and multiplied it by their industrious efforts. For example, Andrew Mellon built a dynasty with his inheritance from his wealthy father.

In other cases, inheritors of great wealth have wasted it away, ending up with less than they inherited. Or they have chosen to spend their wealth and industry on philanthropic endeavors instead of building more wealth.

How Many Generations Are Considered Old Money?

“Old Money” is inherited wealth. But inherited money is not necessarily “old money.”

Sam Walton was a self-made multi-billionaire and founder of the mega-retailers Walmart and Sam’s Club. As a result, Wal-Mart Stores, Inc became the world’s largest corporation in revenues, and Sam Walton became the richest person in America.

Sam Walton died in 1992, leaving his net worth to his four children as well as a foundation. Each of his children received about $70 billion. Three of his children, first-generation inheritance, are still alive and together comprise the wealthiest among wealthy families. Despite their enormous inherited wealth, the Walton family is probably not considered “old money.”

Social scientists generally agree that wealth must be sustained through more than three generations before being considered “old money”. That is, it doesn’t reach the social status accorded to owners of “old money” until it has aged for three or more generations.

What Is New Money?

Simply put, new money is wealth that is not “old money”. It lacks one or both of two fundamental characteristics. It is not inherited. It has not aged for enough generations. It is typically self-obtained wealth.

Of the Forbes top 15 wealthiest Americans, none are old money people. All are self-made individuals who created new money or first and second generational wealth.

When Does New Money Become Old Money?

Perhaps never. If it is not sustained and built on but rather dissipates or is squandered before it can survive multiple generations, new money will never see the day it is considered old money.

On the other hand, in the hands of an aristocrat or nobleman, whose social station is established without the help of money or wealth, new money can become “old money” immediately. However, this is not likely to happen in America since America has no nobility class and minimal aristocracy.

Is “New Money” An Insult?

Nouveau riche are those who have recently become wealthy people. They are simply newly wealthy. They are typically held in contempt as wealthy people who have no class or good taste, common characteristics of “old money” or aristocracy.

The newly rich are often held in contempt by both “old money” and lower classes alike. Old money people view the newly rich as boorish and the antithesis of good breeding. They are metaphorically looked down upon by old money because they are perceived as a lower class.

The lower and middle social classes scorn nouveau riche partly because of envy. They also resent the nouveau riche tendency to flaunt their newfound wealth with extravagant spending. But they also perceive that the nouveau riche were unfairly enriched, sometimes at the expense of the lower and middle classes.

Determining Wealth Brackets

The purpose of wealth brackets is to make comparisons. Put another way; wealth is a relative concept. For example, brackets are used to define a social group or segment in terms of their wealth relative to the wealth of other groups.

Let’s say you want to know how many people are included in the top 1%, or 5% or 10% of the population in terms of wealth. When you gather the data to calculate the number within that bracket, you also determine the wealth below that bracket.

Income and wealth brackets can be framed in countless ways. For example, brackets can be determined to portray arbitrary categories of real wealth. Or they can be designed to show public perceptions of what is a subjective measurement of wealth.

In other words, what do people think is low, moderate, and excessive wealth or income, and how do they believe they measure up to those brackets.

Brackets can isolate ethnicity, education levels, rural vs. urban, age groups, wealth sources, type of money, etc.

Since 1989, the Federal Reserve has published statistics gathered by the Survey of Consumer Finance. In 2018, they reported that the median net worth in the United States is $122,000. The average net worth is $750,000.

Also, informative wealth brackets are published by large banking institutions and Forbes.

It is reported that the U.S. has 22 million millionaires and 724 billionaires. But, unfortunately, the statistics do not bracket old and new wealth. That’s because the old money – new money dichotomy is subjective susceptible to different measurement methodologies.

Old Money Vs. New Money

Here we break down the different segments of society and history as it relates to old money vs. new money.

Literary and Film Treatment of the Subject of Money

The dichotomy between old wealth and new money is the frequent subject of literature and film. Notable are Upstairs/Downstairs, Downton Abby, among other television series. Film treatments include Gosford Park and multiple film versions of The Great Gatsby.

Novelist F. Scott Fitzgerald is prominent among authors who have addressed the subject in his The Great Gatsby and other novels. In Gatsby, Fitzgerald showed his disdain for both old money and new money.

Before turning to his works, it is important to show that they are autobiographical to some extent, particularly in the first-person narrative of Nick Carraway, who reflects Fitzgerald’s observations in Gatsby about old money and new money.

Fitzgerald was born in Minnesota to a middle-class family in 1896. He went off to Princeton, where, as one of only a few Catholics, he was exposed to both old money prejudice and new money mores. He left Princeton to join the army in the midst of World War I.

He had his first love with what would be a pattern of relationships with women from wealthy families. She was Ginevra King, a Chicago debutante. Her parents looked down on Fitzgerald’s relative poverty and disapproved of his relationship with their daughter. Her father told him, “poor boys shouldn’t think of marrying rich girls,” a notion that made its way into the Great Gatsby in the voice of Daisy, Gatsby’s rich-girl love object.

He married Zelda, the debutante daughter of Southern protestant old money who had viewed with disapproval Fitzgerald’s Catholicism and relatively poor background; Zelda declined to marry him until he became financially successful.

Thus, Fitzgerald experienced two crushing rejections by old money for his modest financial and social background. He had also experienced the exposure to old money at Princeton where, as Catholic in a WASP student body, he felt like a social outcast.

This Side Of Paradise

He achieved his first significant success as a novelist with his autobiographicalThis Side of Paradisein 1920, which thrust him into the coterie of new money. This coincided with the beginning of the roaring 1920s Jazz Age that was characterized by the extravagant and reckless spending and lifestyles of the nouveau riche. With his wealth and celebrity, he was warmly welcomed into the high-class society, where he observed with disdain all of its faults.

Fitzgerald’s observations about the dichotomy between old money and new money were famously portrayed inThe Great Gatsby. It showed the crassness and conspicuous consumption of the nouveau riche represented by Gatsby and the invitees to his lavish raucous parties. But, on the other hand, it showed the disdain that the self-absorbed old money crowd (portrayed by Tom and Daisy Buchanan) had for anybody who was not old money.

Fitzgerald’s most disdainful observation about old money occurred at the end of the novel when, after Gatsby’s murder, Nick observes that “old money” (Tom and Daisy Buchanan) “were careless people, they smashed up things and creatures and then retreated back into their money or their vast carelessness or whatever it was that kept them together, and let other people clean up the mess they had made”

Wealth Source

Old money and new money have quite different sources of wealth. Old money wealth has its genesis many generations earlier. It was made by ancestral efforts, not their own. However, in some cases, current owners of old money work hard to maintain and grow such wealth.

New money wealth is generated by first or second-generation efforts. Today, much of new money wealth is accumulated by financial (e.g., hedge fund) and technology businesses.

Social Perception

Public perceptions of old and new money social groups are generally accurate perceptions of private reality.

Old money upper-class people usually like to maintain a low profile with minimal public display of wealth. Like a famous football coach cautioned his players against wild end-zone demonstrations – “act like you’ve been there before.” Old wealth does not need to reassure themselves or others that they deserve their elevated social status. Most do not like to draw attention to their wealth.

New money people don’t act like they have been there before because they haven’t. They have coveted it so much they like to show it off, and they do. Many old money people prefer to drive modest vehicles, and new money people are more apt to drive very expensive attention-grabbing cars.

Spending habits

Many people who enjoy the status of old money are downright frugal. Their frugality is not a symptom of experience with poverty like children of the great depression. It’s their nature. They don’t have to spend lavishly to remind them of their wealth.

Moreover, they tend to believe that their money is not theirs to spend. Instead, they consider themselves stewards of the family wealth to be passed on to the next generation.

Nouveau riche, on the other hand, often spend lavishly because they never had the luxury of spending before. They’re making up for the lost time. As a result, they can become addicted to conspicuous consumption and a money lifestyle. Also, never having before experienced wealth, they simply don’t know how to handle it.

Moreover, wealth can be a heavy influence on behavior and attitudes. They feel that they made it, so it is theirs alone to spend and enjoy.

Adjusting To The “New Money” Learning Curve

Understanding the old/new money dichotomy and the future of money is necessary for forming or adjusting marketing and product development strategies.

It is a well-known fact that psychology is an essential element for effective marketing and purchasing habits. For example, suppose you are designing a product to appeal to old money or a new money market. In that case, you will want your product to appeal to that social group’s values and psychological tendencies.

For example, if you target a product to new money, you will want that product to have flamboyant, eye-catching features. On the other hand, a product developed for an old-money niche must be elite, classy, not flamboyant, and especially one-of-a-kind.

If you are a residential real estate developer targeting a new money market, you will develop properties in a highly visible upscale neighborhood with other rich people. Nouveau riche, like being around other rich people.

On the other hand, old money people will prefer seclusion and privacy. They also want comfortable luxury with no need to impress other people. They want products that are exclusive and elite, not things that will compete with others.

Finally, anybody in the wealth management profession must have a keen knowledge and understanding of old and new money.