Bank of Mum and Dad: why we all now live in an ‘inheritocracy’
Bank of Mum and Dad: why we all now live in an ‘inheritocracy’
Family wealth dictates our life choices. So is the Bank of Mum and Dad now behind so many of society’s growing inequalities?
You know the Bank of Mum and Dad when you see it: it’s your friend who seems broke, but always has a safety net, or who suddenly (but discreetly) acquires the deposit for a home. It’s those who stayed with their parents while they saved for a flat, or stuck it out in a profession they were passionate about even though the wages are chronically low. It’s those who do not need to consider the financial costs of having children. It’s those whose grandparents are covering nursery or university fees, with the Bank of Grandma and Grandad already driving an economic wedge between different cohorts in generations Alpha (born between 2010 and 2024) and Z (born in the late 1990s and early 2000s).
This is the picture we know, but the Bank of Mum and Dad is not just a luxury confined to the 1% – it is also evident in families like mine. I grew up in a working-class household and was the first person in my family to get a degree, but it was the fact my parents had scrimped in the 1980s to purchase properties in London (and allowed me to crash in one throughout my 20s) that has arguably been the true source of opportunities in my life.
In recent years, we have rightly widened the conversation about privilege in society. And yet how honest are we about one of the most obvious forces shaping anyone under 45: the presence or absence of a parental safety net? The truth is that we live in an inheritocracy. If you’ve grown up in the 21st century, your opportunities are increasingly determined by your access to the Bank of Mum and Dad, rather than by what you earn or learn. The economic roots of this story go back to the 1980s, but it accelerated after the 2008 financial crisis, as private wealth soared and wage growth stalled. In the 2020s, rather than a meritocracy – where hard work pays off – we have evolved into an inheritocracy, based on family wealth.
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People should always have access to essentials, and I count an affordable reliable roof over their head as one of those things. But are we ever going to be able to change the fact that someone on the receiving end of three generations of doing moderately well in life is going to be massively more advantaged that someone whose parents were 4th and 5th in large poor families?
Someone's parents having even a modest home with a spare room in London puts them at a massive advantage over their peers who have to privately rent. But aside from ensuring the fundamentals are in place of affordable accessible homes, is there really any realistic way of nullifying that advantage and is it even right to do so?
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aside from ensuring the fundamentals are in place of affordable accessible homes, is there really any realistic way of nullifying that advantage and is it even right to do so?
I don't think that's an aside, I think that's the key to solving a lot of problems with our current society. Give everyone a roof and enough nutritious food, and most people can figure out how to live their lives from there. The problem is that the lack of housing and food options forces people into low paying jobs with no upward mobility, and continues the cycle of poverty.
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I didn't write that as "an aside", I wrote "aside from". You need to read it as "besides". In the sense of "obviously this needs to be done fundamentally and as a priority, but besides that... etc".
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Why shouldn't everyone have access to housing, food, education, tutoring, and transportation like those people who inherit from their parents?
The social impact of engaged parents can't be missed, but there's no reason why there should be a material aspect.
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Because, fundamentally, most people work because it makes their life better than if they weren't working.
It we so heavily correct the system so that you get the same house whether your working or not, your kid goes to the same school whether your working or not, they get the same homework tutors whether your working or not, you have access to the same transport or car whether you work or not.. you get the point.
How many people would even turn up to work if it made no material difference to their life?
But as soon as you allow people's effort and choice to create an actual difference in the quality of their and their kids lives then you inevitably end up with inequality, because people make different choices, are motivated to work hard to different degrees. This gets compounded when some families simply build on the moderate success of the parents.
Rather, isn't the better option to just make sure that the "bottom" option is not inhumane and is actually basically alright. In fact, it should be as good as we can possibly make it. BUT then you have to allow that choice, hard work, sacrifice can possibly make a difference and people can improve their lot.
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Your post points to the answer.
If people’s absolute essentials could be guaranteed: housing, healthcare, education, and food, then all the “advantages” would only affect the bonus region above that where wealth and privilege reside.
The problem is that it’s very possible for those life essentials to be threatened because other people have wealth and privilege.
If there was just a floor on this damn thing we could stop talking about all this. But American culture dictates that that floor must be squarely below the point of dignity and deprivation, so that people don’t get comfortable. Because we can’t have that. Ever. Because it’s a moral hazard to the soul. Unless you’re born rich. Then you can have comfort for free, and there’s magically no moral hazard to your soul somehow.
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"Abolish inheritance"
But what about my inheritance
*sigh*
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Inheritance isn't the root problem. The problem is that the only people with any money are people who were able to save it decades ago. And that problem is because labor has been devalued, wages stagnated, and cost of living soared.
And all of that is because for the past 40 years or so, there has been more benefit to taking profits out of business than spending money within the business.
When you reach the top-tier income tax bracket, and the IRS starts taking 91% of your income beyond that level, $10,000 of business income is only worth $900 to you.
When your best employee wants a $10,000 raise, that money comes straight out of your "excess" earnings. It is $10,000 of your earnings that are not subject to taxation. Paying that $10,000 raise only costs you $900 once you reach that tax bracket.
But we don't have a 91% top-tier income tax bracket anymore. We had a punitively high top tier rate for most of the 20th century, but it got cut down in the 70's and slashed in the early 80's. Now, the top tier income tax bracket is just 37%. When you reach that bracket, giving your best employee a $10,000 raise takes $6700 out of your pocket, instead of just $900.
Reagan's views on the Laffer curve were correct: raising the tax rate beyond a certain point will actually reduce tax revenue. But tax revenue is not why we need the high rates. The benefit of high marginal tax rates comes from what business does to avoid them. We need to restore the business incentives that come with a punitively high top-tier income tax rate. We need businesses to increase their labor expenses to avoid that tier. Businesses should benefit the whole economy, not just the ownership class.
For similar reasons, we need taxes on registered securities, payable in shares of those securities. The shares collected as taxes will be liquidated in small lots over time, comprising no more than 1% of total traded volume, to limit their effect on the market. Exempt the first $10 million held by a natural person; tax everything above.
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I mean, it's not that clear-cut. There's still people who have a nice job and save a lot of money, it's just a somewhat smaller group than there used to be, and at the same time the gap with non-nice jobs is larger. Furthermore, $900 is still $900, I question if some random shareholder really cares about a stranger's raise that much.
More redistribution would help the inequality problem, for obvious reasons, though. You're right about that. I also don't buy that nobody will do anything without a small chance of becoming a billionaire, or that billionaires are really hundreds of thousands of times smarter than the average person and we need them to be happy.
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They could be smart about it. No taxation on inheritance under 2 million (I'm pulling these #s from the sky). Anything over gets taxed progressively; if if these billionaires won't pay up during life we can grab it on the way out.
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That only accounts for a small portion of parental contribution and is easily avoidable by an early inheritance.
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Nobody bats an eye when you say, "early inheritance," but everyone gets sooo upset when I murder my parents
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My parents blew up any inheritance I would've ended up with due to bad decisions and shit luck.
Now my mom depends on me during her final years as we cruise the stars in a two-bedroom apartment.
A lot of my friends live together and share rent. Some with their parents, and a minority got hitched and live with a spouse. It seems like a lot of people depend on small family groups these days.
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Multigenerational homes, or living with a bunch of people, was the norm until less than a hundred years ago. It was only a brief period of time of immense economic and technological growth that we saw people living independently in large numbers. We're just watching a regression back to the mean. And I don't know how we avoid it with a growing population, and not everyone wanting or willing to live in a city.
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Honestly, if you're family is okay, not living with them because you don't want to seem lame was always a dumb use of resources. That might be one of the stupidest things white people ever invented, and we did savoury salads embedded in jello.
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Thing is, if I want to run around naked the whole day I want to be able to do that. If I come home absolutely shitfaced at 8am I don’t want my parents to comment on that. If I want to have loud sex I want to be able to do that. It used to be normal but it absolutely sucks to have no privacy and I don’t want to go back to that as a grown up.
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The only friends I have, including myself, that own their home are those with dead parents.
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I know of other situations. Sometimes they give well still alive to avoid the taxes, haha.
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Own as in with a mortgage or own outright? Different things...
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I have friends with mortgages. They can't have kids though because it takes two incomes and then they can't afford childcare AND a mortgage
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Either. The contrast I’m making is that the large majority of people my age that I know are renting. It’s not until windfall that it’s possible to buy property.
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If you want to tackle this you have to take on inequality. Now we all know if corporates weren't allowed to pillage profits for themselves, and had a salary tied to their lowest employee, this would go a long way to improving inequality and that alone could offer a lot of people a lot of opportunities. But as long as you have a system where people have to collect arbitrary numbers to acquire necessities there is going to be inequality.
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I believe this is the main source of unfairness in my country. I have a good pay, but most of it goes for housing. So I live the same life as someone who works for a minimum wage if they inherited their home or can live with their parents.
Even though I had to work and invest way more to get to my salary.
But what is even worse is that in eyes of our government I am considered rich and I get no social benefits and I also pay way more taxes than those who are "poor".
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We have never lived in a meritocracy. That is just some bullshit billionaires will tell you while you work yourself into an early grave.
And here's some free life advice: If you can stand to be around your parents once you reach early adulthood, continue to live with them. Life is cheaper in groups. Pay some rent and your share, but you'll find it a lot easier to save money for your own place when some leech landlord isn't funnelling all your hard earned money off to their own retirement fund.
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Yes and no. Back in the 50s-90s you could really either live cheaply or work hard and get ahead with some skill and some luck.
Now you can't really do either.
Ask ppl in their 80s if they ever worried about their kids being able to make a living by hard work alone and they'll tell you no every time.
That opportunity to get ahead by hard work is gone... But it used to be there for everyone
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That opportunity to get ahead by hard work is gone
I think this is really bullshit. It's harder than it was, absolutely. But you can do it, it just takes sacrifices which people these days seem to want none of.
You always hear about people's grand/parents moving to some town and starting a life. And it's viewed romantically but in reality, it was likely a sacrifice.
Earning $15k above the median salary with a partner earning minimum wage, I managed to save enough for a house deposit in about 18 months. With nothing but a diploma I got in 12 months. It sucked, I never went out, cooked nearly every night and had very few indulgences. I moved over an hour away from where I grew up and I had no help. This is in one of the top 10 expensive property cities in the world.
It can be done, don't be so negative.
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I bought my first home half with money I’d saved by working, and half with some money I inherited from my grandparents. I was also able to buy with only 10% down because it was 2005, leading up to the sub-prime mortgage scandal, and they were giving out mortgages very easily.
Fast forward some years.
I reluctantly rented my place out for a couple of years because I needed to move myself and the mortgage was underwater following the 2006 crash caused by all those sub prime mortgages. I rented to a nice couple and although I gave them a very attractive rent and treated them as well as possible, there was no question that their rent money got me through that housing crisis and eventually allowed me to sell at a significant profit instead of losing my ass.
When I sold, I offered my renters a deal to move out. They took it, and said that they were buying their own place as they had inherited a small amount recently.
For me this was a perfect example of how, just because my grandparents died a few years before theirs, I was their landlord and not the other way around. I got protection for my investment on their dollar. And once they too got the benefit of inheritance, they were able to graduate to the next level themselves.
Years later I’ve remained a homeowner and am sitting on multiple millions in equity from all the appreciation during that time. My remaining mortgage payments are about 1/3 of what it would cost to rent the same home. My wife’s younger siblings, by contrast, can’t even afford to buy under any circumstances because the market is so high. And of course lending standards are much more strict now.
For me this is a perfect example of generational advantage. Here I am sitting pretty just because I’m 10 years older than them, while they have to move out of state just to get a start.
Anyone who thinks this is a fair and equal opportunity economy is a damn fool. As long as you are competing against people who have advantages you don’t, it doesn’t matter whether your theoretical opportunities are equal. You’re going to lose and wind up in servitude of those who won.
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I was able to migrate over to work and study because my family paid for the trip and even though the deal was that I were to work and be by myself I could always call to ask for emergency money. I did that twice, one for paying for my college inscription and other for rent. Without that I wouldn't had the comfortable life I have today.
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I'm in this picture, and I do not like it. Well, okay, it's better than not being in this picture. When I die I'm going to give as much as possible to charity, for what it's worth.
This is the picture we know, but the Bank of Mum and Dad is not just a luxury confined to the 1% – it is also evident in families like mine. I grew up in a working-class household and was the first person in my family to get a degree, but it was the fact my parents had scrimped in the 1980s to purchase properties in London (and allowed me to crash in one throughout my 20s) that has arguably been the true source of opportunities in my life.
Hate to break it to the author, but that sounds like somebody who started in the (upper?) middle class, and now is in the 5% at least. That's properties plural, in London. C'mon, everyone with money points to someone they know that's the next digit up so they can be just average. I find that tacky.
Edit: Okay, I actually read the article. The author points that out themselves:
But is this really the true story? Or have I just fed you a “working-class done good” tale, because that’s how I attempt to justify my own exceedingly privileged position? One academic investigation into the Bank of Mum and Dad found that its beneficiaries tend to frame this considerable financial support not in terms of their own individual privilege, but as evidence of their parents’ hard work and upward mobility. Whereas once parents lived vicariously through their children’s successes, now it seems their kids live vicariously through their parents’ struggles. And there lies the problem.
I'd also like to draw attention to this bit, which really resonates:
Young people’s frustration is so pronounced these days because this reality runs contrary to what we were told growing up. Then the message was, work hard, get a degree and you will be rewarded.
I literally don't know of anyone this actually worked for, at least at the current stage of our lives. What were the teachers smoking?
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Well, wages are shit and prices are unjustifiably high. So yeah, you fall to the safety net or the ground.
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This tracks from my experience.
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Gonna be honest, income inequality is awful in America, but this post feels more like sour grapes.
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Nice to finally see someone talk about this. Every time I see those popular posts on reddit litigating how good their boomer parents have it, all I can hear is cry-bragging about how wealthy they are.
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you all might. my folks were never that well off. my mom had to work cashier jobs the first 5 years of me and my sis life and those jobs were chumpchange even then
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It’s those who stayed with their parents while they saved for a flat, or stuck it out in a profession they were passionate about even though the wages are chronically low.
This part in particular I find to be a strange thing to complain about... Like, some people have the option of living with their parents, so what..?
This fantasy that everyone moves out of their parents' house and becomes totally independent the day they turn 18 is just another bullshit American dream that has little basis in reality. If you happen to have the privilege of your empty childhood bedroom in your parents house, and you have a good enough relationship with your family to make it work while you follow a vocation or save up money for later, that's not something to be ashamed of--it's making the best of your circumstances and being smart with how you spend money.
Remember kids: there's no magical stat bonus for adult dignity in giving half of your monthly wages to some asshole landlord if you don't have to, so don't let people shame you out of living with family in a multi-generational household like so many people do relatively happily in countries all over the world.
Yes, it's true that not everyone has that privilege (a good relationship with their parents, an extra bedroom to sleep in, etc.), but as long as you're contributing (financially or otherwise) to the shared household in some way, there's no more shame in living with your parents than their is living with non-family roommates, a spouse, or whatever.
I think most people, whether they've experienced it or not, would agree that the privilege of living with your parents isn't exactly a luxury or an ideal way to live, but there really is no shame in it. If you're a good person who works hard and are only able to save up enough money to work towards your goals because you save money on rent by living with family, doing something like saving up for a house is still a big achievement and nobody should try to take that away from you.
Imagine being butthurt about people who live with their fucking parents and not laser-focused on the fact that a 0.1% of people have 99.9% of the money in society. It's fucking nuts.