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How important is your parent’s wealth in determining your income?

How important is the level of your parent’s wealth in determining how rich you’ll become?

Well…not much according to a  recent study by US-based Stanford Centre on Poverty and Inequality.

The study showed  there is strong evidence that parental wealth matters less in Australia for the future income of children than in most other countries, with the exception of only Denmark, Norway, Finland, Canada and South Korea.

Parental Wealth

Report author Professor Miles Corak, of the University of Ottawa, drew these conclusions by looking at the strength of the tie between what a father earns versus what their sons take home in adulthood.

Why is this so?

The report poses a number of theories for why mobility is stronger in countries like Australia, including the fact that poorer households are better placed than most to provide “stable and enriching” family environments.  world globe

This may be because of better access to basic education for children as well as the fact that children living in low-educated households have fewer mothers in poor health, compared to the US and UK.

Another factor assisting the mobility of Australians from poor backgrounds is that unlike the US, Canadians and Australians are less likely to have a mother in full-time work.

Australia’s skills-based immigration system also seems to be helping with mobility.

Professor Corak says that “an astounding 43 per cent” of Australian children in high-education households have at least one immigrant parent.

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About

Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


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