I read a news article recently that stated that 1 in every 5 residents of Boston has a net worth of over $1 million. I shared the news with a friend of mine who had visited the city recently. She was incredulous.
She noted the lack of expensive sports cars on the street, the conservative and understated dress of the general populace, and sad state of affairs regarding what she termed “the club scene.”
All of this, in her mind, added up to a metropolis that could not possibly be affluent. I shrugged off the assessment, and then decided to add up the reasons why Boston just may be The Wealthiest City in America.
- It’s the money. Actually, 1 in 5 people in Boston do have a net worth of over $1 million dollars. It’s not a preposterous as it sounds, as government estimates now show that 1 in 20 to 1 in 25 American households now have assets of over $1 million.
- One and done. The divorce rate in Boston hovers around 10 percent, well below the national average. This means that family wealth has a better chance of being preserved and passed on to future generations.
- Book ’em. In 2012, it was estimated that 39.2 percent of 18 to 34 year-old residents held at least a bachelors degree from college. This probably contributes to higher earning potential, and the ability to hold on to wealth once it is acquired. With over 100 institutions of higher learning in the greater Boston area, the culture of higher education is strong and large.
- Bling is not our thing. Conspicuous consumption is still regarded as distasteful in most of the city. Bostonians are busy getting things done. High fashion is a concept that the locals do not understand and one the climate does not encourage. When you don’t spend money on that foolishness, you save it, invest it, and grow richer.
- History and culture count. Boston’s important contributions to America and the world in the areas of political thought, the arts, and literature are self-evident. The city’s 40 museums, numerous libraries, and countless historical monuments testify to its vital role in our country’s progress.
In short, a preponderance of Old Money Values still permeate the city. The results speak for themselves.
- BGT
I feel the same way about Boston and I applaud the spirit of this post, but your numbers are way off. You say that 20% of the population of Boston are millionaires. The city with the highest percentage of millionaires is New York, where 4.63% of the population are millionaires. Houston is second with 2.09% and San Francisco is third with 2.07%. No city in America has anywhere close to 20% millionaires.
You state that the divorce rate in Boston is around 10%. Around 10% of the population of Boston is divorced, but the divorce rate in Boston is around 40% (which is still lower than the national average). The divorce rate is the percentage of all marriages that end in divorce. The percentage of the population that is divorced is much lower because many people are separated but not divorced, widows or widowers, are too young to get married, have decided not to get married or simply haven’t gotten married yet.
As you can see, I’m a little bit of a nut for accurate statistics. I hope you don’t mind that I point this out, but I can’t resist being “helpful” (wink, nod).
I do think that what Boston has a lot of is quiet money. This usually goes along with cultured, highly educated people and it usually goes along with old money. Of course, there are no statistics on which city has the most quiet money and there are probably none on which city has the highest percentage of OMGs, but my bet would be Boston is number one in both.
I apologize if if I was rude for pointing out the statistical mistakes and I do think you have captured something of the unique culture of Boston. Its always a pleasure to read your posts. Thank you.
Amy, you are right to point out anything that doesn’t resonate or appear accurate on this blog. I appreciate it. And you’re on point with the ‘quiet money’ aspect of Boston. There really is something about unique about the culture of Boston. Thanks! – BGT
P.S. I just re-read your post and I think you’re mixing up the number of people who have assets of over $1 million and the number of households that have over $1 million. If one in five households have assets of over $1 million and the average household has four people, then one in twenty people have over $1 million. One in twenty people is 5%, which is still a lot.
Amy, are we talking about liquid investable assets or does it include home values? Because even with student loans I have a net of over $250k, excluding my husband’s retirement savings. And in case it’s not clear, I’m from Boston. When the median home price in an area is $350k, and you have all the other factors (highly educated, conservative, low divorce rates etc.), it’s not that far fetched to have a population where millionaires are a high % of the residents. Half of that value can come from your equity, unless they specify otherwise.
Also, given that there are as many people in the whole state of Massachusetts as NYC alone, 5% is not going to be nearly as many people.
Good question, Blogmother. Net worth is normally defined as liquid, investable assets minus liabilities. This does not include the value of the house. A house does not produce income for the owner. You could sell your house, but you would have to use the money to buy a new house of equal value or invest the money to create an income stream to pay the rent or mortgage on your new dwelling. There are a few exceptions (huge increase in the value of the old house and you sell it and buy a much cheaper house) but generally the value of the home is not included in net worth calculations.
Also, the distinction between individual net worth and household net worth has nothing to do with the value of the house. Household net worth is the net worth of all individuals in a family living together in a single household. This is frequently a more significant measure of wealth than individual net worth because, for example, children and teenagers usually have little or no money of their own, but if the parents are rich, every member of the family will likely derive substantial benefit from that wealth.
Right, but one of my houses DOES produce income… Do do I include it because it’s an investment property, or exclude it because it’s not highly liquid?
And you’re right that homes aren’t usually included, but he didn’t specify, also when combined with the fact that 20% seemed high, I was considering the various ways that this could be possible.
In any case, thanks to both of you for the stats. They confirmed what I see every day around me.
Thanks, Blogmother, good point. Obviously, this wasn’t one of the more articulate posts I’ve written since it’s creating so much confusion. I think we have to just agree that Boston has a culture of ‘quiet wealth’ and I should be banned from ever using statistics again in any post. Ha! – BGT
There are specific ways of calculating net worth for specific purposes, but in general an income producing investment property is an asset that is factored into net worth. You’re right, it is somewhat illiquid, but you could sell it without having to buy a new house or rent a new apartment for you and your family to live in. You raise some good points, but I think we’re getting a little off the topic of Byron’s original post.