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How can the poor get rich?

By David McMillin · Bankrate.com
Friday, November 8, 2013
Posted: 4 pm ET

You've heard the story plenty of times. Born into poverty, a person works hard, overcomes obstacles and finds his or her way to personal finance success. It's the classic American dream. However, how often does it actually come true?

Unfortunately, the findings from a new study from The Pew Charitable Trusts, a nonprofit organization working to improve public policy, indicate that the rags-to-riches story may belong in the fiction aisle for the majority of poor Americans. Using data from families between 1968 to the present, the research reveals that 70 percent of children who are born into lower-class conditions never even make it to the middle class, let alone the upper tier of society. The research also underscores a continuing racial disparity in the country. Whites are twice as likely as blacks to leave the bottom rung of the ladder.

These findings are troubling, but the research does highlight which factors can make an individual's personal-finance situation more promising. Earning a college degree and being part of a dual-earning family increase the likelihood of moving up from the bottom.

There is another very important piece of the American-dream equation. The report points out that individuals who did leave the bottom of the economic ladder had six times higher median liquid savings. Consider this statistic: Someone with $10,000 in liquid savings is 5.5 times more likely to move to the middle class than someone with just $1,000 in liquid savings.

I realize the challenge that this presents. When someone has very little money, it's not easy to put much of that away for the future. However, there are small steps that can add up toward big payoffs down the road. Rather than working to figure out how to earn more immediately, it's wise to determine how to spend less. Reducing expenses is a simple method to saving more.

What do you think of the research? Do you think the American dream can become a reality for poor citizens?

 

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29 Comments
Theo Pickett
November 14, 2013 at 7:06 am

I was born in 1947. I joined the US Army in 1966 and was trained as a Radio/RadioTeletype Operator (this specialty has been discontinued) and worked as a Telephone Repair Tech. following my Hon.Discharge, until I was so damaged in an auto wreck that I could no longer understand elec.theory and resumed my formal education, graduating from a New England State Univ. at age 40 with a BA. When I got back out in the working world in 1988 I discovered that I HAD to have a Masters Degree to gain an entry-level position, even when it was advertised as a Bachelors Degree required. So in my generation the requirement has gone from a High School Diploma to a Bachelors to a Masters Degree. Ain't progress wonderful?

Theo Pickett
November 14, 2013 at 7:06 am

I was born in 1947. I joined the US Army in 1966 and was trained as a Radio/RadioTeletype Operator (this specialty has been discontinued) and worked as a Telephone Repair Tech. following my Hon.Discharge, until I was so damaged in an auto wreck that I could no longer understand elec.theory and resumed my formal education, graduating from a New England State Univ. at age 40 with a BA. When I got back out in the working world in 1988 I discovered that I HAD to have a Masters Degree to gain an entry-level position, even when it was advertised as a Bachelors Degree required. So in my generation the requirement has gone from a High School Diploma to a Bachelors to a Masters Degree. Ain't progress wonderful?

Joe
November 14, 2013 at 5:43 am

I was raised my a signal parent, my mother. She worked in bars,at night. We lived in motels, apartments & rentel units all over out little Island town of Key West Florida I sold papers on the corner and worked on fishing boats at 8. I had money in my pocket when my friends with 2 parents a home & nice things to wear had none. It was the way I found my worth. The drive to do better, to have something was very strong. I'm 63 and still have that drive,along with a beautiful wife & famiy, a business of 30 plus years that allows me to help our community. I don't see myself ever retiring. I have much work to do. It's out there friends. You have to want it. It starts with work. Have a blessed day. Joe

Thomas W. Yale
November 14, 2013 at 5:37 am

The study including a few comments regarding motivation and attitude are included here, but environment seems to be totally ignored.

Take a look at it from a biological perspective: a organism thrives in an environment where conditions are favorable for its survival. That, however, is a matter of degree. If the environment is less favorable, then the organism strives to adapt and becomes that much more robust. Further along that spectrum, if the environment is close to or not at all being favorable for survival, then the organism has a greater probability of facing extinction.

Did the Pew Charitable Trusts consider the state of the economy as the environment for the organism of personal wealth? Did they look only at the effects and not the probable causes? If so, their research serves the purpose of simply examining how bad things are instead of the more cogent purpose of finding a solution.

Furthermore, what individuals think are the causes are not facts but opinions based on individual experience and circumstances that not everyone share. What does the research say about it? Does it say anything about it at all?

Dave
November 14, 2013 at 5:37 am

Hey Mark, I don't have a degree, but I know how to spell college

James
November 14, 2013 at 2:25 am

I think a big problem is motivation. Most people want money not to be safe, but to spend it. Most people feel a huge motivation to spend money as soon as possible, saving it feels almost painful.

Jeff
November 14, 2013 at 2:14 am

I'm a big fan of the attitude and reality that if you save a little everyday then you are richer than the day before. Very few people are savers, most are spenders. People that are unable to save should consider careers with major corporations that provide benefits and retirement. I know people that will never buy health insurance, no matter how much they make. The only have health insurance if their employer provides it. They spend every penny on vacation, sports teams, etc. and never have more that a few thousand in the bank. When the economy went bad they debt sunk them into bankruptcy. Interest is a terrible. Financial institutions have figured out how to get paid for everything we do. Stop doing business with banks, credit card companies, etc. Live debt free and prosper.

Tom
November 14, 2013 at 12:53 am

We cannot all start to save (lots) more; doing so will cause a recession (or an existing economic downturn to get worse), i.e. layoffs will result due to less consumer spending. How much economic contraction occurs depends upon how much savings occurs. That's Econ 101's Paradox of Thrift.

Jo
November 14, 2013 at 12:21 am

Mark
Did you start out with a plan or a vision of what you wanted the end result to be in a certain amount of time?
Jo

Mark Bowne
November 14, 2013 at 12:03 am

you gotta be kidding me. There seems to be no way outta this situation. I went to collage at 57 and to no avail. Ive done so much and all I get is poorer.

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