What Does It Take to be 'Wealthy'? How About $5 Million
When it comes to defining wealth, the line between the rich and everybody else can be unclear. Admittedly, the trappings of wealth are fairly obvious -- expensive cars, huge houses, big yachts, and miniature giraffes all come to mind -- but as for the specific number, the precise sum that one needs to possess to be truly rich, definition becomes a little harder. Recently, however, a survey from Swiss financial services company UBS drew the wealth line in the sand: According to the respondents, the magic number is $5 million.
The survey's methodology was fairly clear: UBS asked 4,450 high-net-worth investors if they considered themselves wealthy. Among those with between $1 million and $5 million in investments, 28 percent claimed that they were wealthy. Meanwhile, among those with $5 million or more in investments, the number jumped to 60 percent.
Of course, the definition of wealth is also a factor. Common definitions of wealth -- having a large bank account, owning your own home, driving a luxury car -- tend to be vague. Then again, according to UBS's respondents, the rich persons' definition of wealth is also pretty fuzzy: The survey found that the majority of investors defined wealth as "having no financial constraints on what they do." This definition could have endless meanings, ranging all the way from "devoting my life to providing healthcare around the world" to "getting away scot free after running over a cop's foot." Sadly, it isn't hard to find high-wealth people on both ends of that spectrum.
While the UBS survey's $5 million figure is steep, it comes in well below the amounts cited in previous studies. In his 2007 book Richistan, author Robert Frank cited a survey by PNC Advisors that found that, for most rich people, the amount of money that they needed to consider themselves truly rich was roughly twice what they had on hand. Thus, people with $1 million wanted $2 million, people with $5 million wanted $10 million, and so on. A 2011 survey echoed this, finding that 42 percent of respondents needed at least $7.5 million to feel wealthy. The average wealth of respondents was, not surprisingly, about half that: $3.7 million.
The reasons for the $5 million wealth line are surprisingly familiar: Like most of us, wealthy people are worried about providing for themselves and their families. The majority maintain at least 20 percent of their assets in cash, so they can quickly get hold of money if they need it. Eighty percent help provide for their adult children or parents and 20 percent have a grown child or parent living with them. And, given that medical bills are the major cause of U.S. bankruptcies, it's not all that strange that 55 percent of young high-worth investors are worried about paying for their health care.
In other words, when it comes to deciding when you're wealthy, forget about the big cars and little giraffes: Real security comes from being able to pay your doctor bills!
Bruce Watson is DailyFinance's Savings editor. You can reach him by e-mail at email@example.com, or follow him on Twitter at @bruce1971.