[ The Money Side of Lifeā„¢ ]

Self-Made Or Spoon Fed? How the wealthy get rich

By Jane Long, Reese Haydon on January 21st, 2013 •

As a culture, we believe anyone can achieve abundant wealth. You don't have to be born into an old-money family whose name is plastered across schools and libraries to make it in America. The American Dream glorifies the self-made person. After all, at one point Rockefeller and Vanderbilt were just regular old John and Neil. But to what extent is it true that hard work is all it takes to make it rich? Reese and Jane investigate.

Reese: All in a day's work 

As of 2011, 75% of the top 400 richest Americans are self-made, according to Forbes. From creating a technology giant to becoming a renowned Wall Street guru, the wealthy elite prove that achieving the American Dream depends on how hard you work.

Even outside the top 1%, hard work lays the path to individual wealth--but it isn't always glamorous. David Sumner built his Portland, OR car wash and oil change business into an enterprise by working nearly sixty hours a week alongside his frontline employees servicing over 78 cars per day. "I worked for almost two years without a paycheck," he recalls.

The years of washing cars, changing oil, and fighting off competition paid off big when Sumner received an unsolicited buy-out offer from regional competitor Oil Can Henry's for nearly five times his income plus assets. "They gave me an offer I couldn't refuse," he recounts, "because they didn't want to try to compete with me."

Similarly, brothers Dane and Travis Boers-ma founded Dutch Bros. Coffee in 1992 with only a pushcart coffee stand that they ran themselves. Dutch Bros. has since grown into a franchising company with over 170 locations and was recently recognized by J.D. Power & Associates for out-standing customer service. With gross sales now $100 million annually, the Boersma brothers' story of brewing a profitable busi¬ness from nothing is a spectacular example of the power of hard work.

Inheriting money from an estranged uncle isn't enough to promise lasting wealth; Kirk Kinder of Picket Fence Financial estimates that 80% of inheritances are spent within 10 years. Likewise, elite connections will only go so far if you develop a reputation as a spoiled mooch. At the end of the day, hard work and wealth go hand-in-hand.

Jane: Connections and circumstance

Economic mobility is more complicated than simply, "get out there and put in a hard day's work." According to research published in 2012 by the Pew Charitable Trust, the circumstances we're born into significantly impact our eventual wealth. Researchers call it "stickiness at the ends": the most poor have the hardest shot at upward mobility, while the most wealthy have the best chances of staying there. Of those who were raised in the top quintile (20%) in the United States, 63% stay in the upper 40% of wealth. Meanwhile, only 4% of people born into the bottom 20% rise to the top quintile. 

Hard work forms the backbone of any self-made millionaire (or billionaire), but often it isn't the whole story. Bill Gates, the wealthiest man in America, wasn't born into a silver-spoon family sitting on an oil fortune, but he did benefit from his upper-middle class status. His parents enrolled him in the prestigious Lakeside School, where he learned to program as a teenager in the then-rare school computer lab. Later, when Microsoft was taking off, Gates' well-connected mother Mary introduced him to the CEO of IBM, which led to major licensing agreements.

The same is true for second-richest American Warren Buffett, who struck gold early in life after soliciting family and his congressman father's wealthy circle of friends for an investment fund. Few would question the role of Gates' or Buffett's effort in their astounding success, but their family backgrounds and ties also played a major role.

Though we idolize wealth in our society, it is not always an accurate reward of hard work. For every millionaire who busted his or her butt to succeed, there's someone juggling multiple low-wage jobs, or treading long days of grunt work just to get by. Factors like access to education, job skills, and even the savvy to know how to apply oneself also count big when it comes to building wealth.

The Bottom Line

The United States is home to 3.1 million millionaires as of 2011, and that group includes both the wealthy-born and self-made. Riches aren't always a matter of mere hard work, but if you plan to make a fortune--or keep what you've been given--expect to break a sweat.

Sources: finance.yahoo.com; forbes.com; fa-mag.com; consumerreports.org; quoteinvestigator.com; dutchbros.com; monticello.org; monevator.com; oregonencyclopedia.org; joshuakennon.com; capgemini.com; pewstates.org; biography.com; wsj.com