How the rich get richer   

We all know the phrase ‘the rich get richer’. It is borne from the fact that most people with existing wealth tend to increase it at a faster rate than others. What is not clear to many is that this is not just growth; it’s interest earning interest.   

Once you have acquired wealth, the system works for you in the background, silently but surely multiplying your wealth even as you sleep. But on the flip side, having little or no wealth means you are on an uphill battle where every step leading towards building wealth is harder, longer, and riskier. This is not an accident; this is how the system is designed.

Here are ways in which the rich get richer:

Compound interest enables money to increase drastically, where the money earned on investments is reinvested to accrue more earnings. For instance, investing in stocks, real estate, or businesses could accrue huge returns every year. This enables their wealth to grow.

Access to better investment opportunities like private equity, hedge funds, and startups. They can increase their wealth at a faster rate through profitable business ventures with higher potential returns.

Inheritance and power allow those at the top to be best positioned to stay forward and to keep moving forward. Instead of spending years building savings, they can immediately invest, expand businesses, or pursue opportunities with less risk.

Asset accumulation (Appreciating assets) refers to investments that increase in value over time, helping build wealth and beat inflation. They grow due to scarcity, market demand, or economic growth. These are assets such as land, stocks, businesses and currency/investments

Tax optimisation helps the rich organise how they make money and how they spend it in such a way that the money is taxed less, later, or not at all within the boundaries of the law. Instead of using heavily taxed money from salaries, they make money from investments such as stocks and real estate, which are taxed less. They avoid selling to accumulate more over time but end up using loans instead of selling to avoid paying taxes altogether.

High investments returns are the main reason why wealthier individuals receive better returns on their investments as they get exclusive opportunities, financial advice, low costs, and information networks, thereby being able to make strategic and long-term investment decisions.

In conclusion, the notion that “the rich get richer” is not merely a result of luck or chance, but rather a result of the way in which the system is set up. Wealth offers greater opportunity for growth through compounding, access, and strategic advantages that are not available to those with little.

Such understanding is powerful because it illustrates that wealth creation is not merely about earning more, but rather about being intelligent with the information and resources available.

While the disparity may seem great, it is possible for individuals to gradually move forward with such an understanding. Indeed, it is not merely about wealth creation, but rather about value creation, being consistent, and being able to take advantage of the very system in which wealth creation is possible.

“Success is not the result of making money; making money is the result of success – and success is in direct proportion to our service.” – Earl Nightingale, American radio speaker, author and motivational thinker