What My Rich Uncle Taught Me About the Power Of Money
Four decades ago, the woman who would eventually be my mother set her sister up on a date with a friend of a friend. My mother was an excellent matchmaker. Not only did she find her sister a husband, she found her sister a husband who came from Old Money—at least by California standards. He grew up in a world of boarding schools and debutante balls and in an era when the richest San Franciscans could trace their family fortunes back to the gold rush, not their company’s IPO. My mother and her sisters grew up in Inglewood, which Tupac accurately described as, “Always up to no good,” though to be fair it was pretty darn okay when they were kids.
My aunt and uncle’s very happy union has created extreme income inequality within my own family. One third of us—my uncle, my aunt and their three kids—are members of the one percent. The rest of us are proud members of the proletariat. For most of my childhood, I was raised by a single mother who was hustling multiple part-time jobs. My mom’s sister had the privilege of being a stay-at-home mom. Growing up wealth-adjacent had a profound effect on my life and my relationship with money.
My uncle is the opposite of the stereotypical trustafarian. He’s a nerdy science professor who drove the Volvo he purchased in the 1960s until it finally died in the early 2000s. He dresses like a slob, and has little interest in luxuries. His simple life is made possible by his family money. Without it, he would never have been able to comfortably raise three children on a single relatively low income in the Silicon Valley. Sadly, that’s all it takes to achieve what would have been a middle class lifestyle a generation ago. But while he doesn’t live like a one-percenter, when it comes to wealth, he thinks like one.
My parents divorced before I started kindergarten, and had planned to sell their house and split the proceeds. My uncle, who understood the real estate market, advised my mother to do whatever it took to hang onto the house. So she gave up her share of their jointly held money and we stayed in our small house with what would soon be, thanks to inflation, a very low mortgage. That house was in the Berkeley hills, where homes now routinely sell for seven figures. The only way she might have gotten a bigger return on her investment is if Warren Buffet were her personal financial advisor. That was the first time I benefitted from having access to rich people.
As a child, I was fascinated by my uncle’s extended family. They seemed so glamorous and sophisticated. My uncle’s parents had two houses—a condo in San Francisco and a summer home in the wealthy town of Atherton. For some reason, I was impressed that the elevator in their building had a padded bench. Their summer house had a pool and what I believed, at the time, was a golf course (it was actually a tiny putting green). Best of all, my uncle had a niece who was about a year older than I me, and I received hand-me-downs from her closet. When my mother was living paycheck-to-paycheck, working odd jobs like teaching oil refinery workers first aid while she searched for a full-time librarian position, I wore clothes from Saks Fifth Avenue. I realize now that my wardrobe made me appear wealthier than I was. Little did people know that when I got home, I’d put on a puffy faux-down vest because to save money, my mother kept the thermostat at 55 degrees. The free wardrobe ended when I was in middle school because my fashion benefactor had grown so tall that none of her clothes fit me anymore.
I was acutely aware of the difference between our family and theirs. Like a pint-sized Gatsby, I was determined to figure out how to jump economic classes. In the fifth grade, our class project was to interview an older person and write their biography, and I decided that my subject would be my uncle’s father. I hoped that he would help me crack the code. I learned that he attended Yale before embarking on a career in finance. This cemented my belief that attending an Ivy League school was my ticket to the good life, though, oddly, I ignored the “went into finance” part of his narrative. I titled my report, “Executive and Philanthropist” since he was an active member of several charities, and I thought using big words made me seem smart. For years afterward, my uncle joked about how his dad was the “world’s poorest philanthropist.” Compared to his childhood social circle, which included a couple people that could be accurately described as philanthropists by adults who understood what the word meant, their family was low-income. Everything is relative.
Years later, when I did gain acceptance to an Ivy League school, my uncle gave me a gift that was even more valuable than I realized at the time: a generous financial aid package. The majority of it was comprised of grants, but there were also loans. He told me not to take out the loans and insisted on paying that portion of my tuition. He later gave the same gift to three of my wealth-deficient cousins. My uncle transferred some stock shares worth approximately the value of the loan to my mother and told her to sell it when the stock went down so she wouldn’t get hit with a capital gains tax. Everything about that last sentence was a brand-new concept to both me and my mother.
That was when I realized that while middle and working class people work for money, rich people make their money work for them. They know how to make money do magic tricks, to make it disappear behind the curtain and reappear somewhere else, to make it invisible to the government, and, above all else, to make it grow.
If I were a sensible person, the rest of this story would be about me majoring in economics and making a fortune on Wall Street, but I had been raised to believe that education was supposed to be about exploring your passions, not learning useful skills. This belief came as much from my family—my mother has a master’s degree in romance languages with an emphasis in Medieval French—as from growing up around people who did not have to rely upon work for all of their income. So I majored in English, like a rich person, because I had the hubris to believe I could make a living as a writer.
Eventually, my dream came true. After toiling as an assistant, I was promoted to a staff writer position on a daytime soap opera. I was a fan of the genre in part because of its focus on stories about wealth and class. Suddenly, I was making serious money. I found a good financial planner so I could teach my money how to dance. Thanks to my frugal mother, I knew how to live below my means. I set up a system of automatic monthly contributions to my investment account and amassed a sizable nest egg in a short amount of time. If it weren’t for my uncle, much of my savings would have gone to paying off student loans. Like someone who was born wealthy, I got to not only keep all my money but to let it grow.
Four years later, when a new head writer fired me along with most of my coworkers, I became a freelancer. My income plummeted. The first year was rough. It would have been disastrous without my savings. Since then, things have gotten better. I’ve managed to avoid dipping into my long-term investments. I continue to make monthly deposits to my investment account, though I’m putting away a lot less than before.
When you have money, everything you do makes you more money. My fairy god-uncle’s generosity extended to purchasing a condo for my grandmother. She paid him rent, but it was well below market rate. When she died, he sold it for a huge profit. The wealthy get tax benefits for contributing to charity, for buying real estate and for various types of investments. The deck is stacked in their favor. I am able to reap some of those benefits because I have figured out how to use being self-employed to my advantage. (If you are self-employed, drop everything and open up an Individual 401(k) right now.)
When I was making big bucks, I offered to pay my uncle back for the tuition assistance he had given me. “Why?” he asked. “I don’t need it.” I feel guilty about this privilege, that I am not saddled with the debt that has made life difficult for so many people I know. I do my best to pay my good fortune forward. On a much smaller scale, I’ve helped out a couple of friends who were going through rough patches.
Nothing infuriates me more than people who espouse the “bootstraps” philosophy, who claim that giving people any assistance will make them lazy. They invariably are unaware of their own privilege, like when Mitt Romney suggested that unemployed college graduates should borrow twenty grand from their parents to start a business. If it weren’t for my uncle, my mother would not own a home. I probably would not have grown up in as nice a neighborhood, which would likely have resulted in my attending lower quality schools. I would have graduated college at least twenty grand in debt, which would have decreased my net worth by a far greater amount because those funds would not have been available for me to invest. It would not have occurred to me to get a financial advisor, so the money that I did save would not have grown nearly as much. Access to wealth, and the knowledge that comes with it, is like getting compound interest on your entire life.
Sara Bibel is a Los Angeles-based writer whose online credits include xojane, tvbythenumbers, biography.com, previously.tv and xfinity tv. She is a former staff writer for ‘The Young & The Restless.’ During the recent two-day “market correction”, she bought some ETFs.