It is Independence Day in Finland. This means many people will be celebrating with a few drinks and likely watching the "Linnat Juhlat", which is a party put on by the president of the country, inviting celebrities and politicians. People like to feel like they are part of the glitterati, though most of the time is spent looking for reasons to pick on them.
Independence is an interesting idea, isn't it? Because, how many of us truly are? None of us can claim that we are self-made, because we likely needed a massive amount of help along the way, to have what we have. A lot of that, we don't even recognize as having an impact on our journey, even though it did.
In the next two decades, the estimate is that about 84 trillion dollars is going to be transferring ownership, with 72 trillion going directly to their heirs. What is going to be interesting is how the recipients are going to spend it, as if current practices are anything to go by, they are going to spend it in order to have a materialistic lifestyle. For instance, during the worst times of the Global Financial Crisis, luxury car sales stayed steady in Finland, but the sale of inherited summer places went up. Essentially, people were selling decades of work their parents, for a shiny car.
Worth it?
In the last few years in Australia, people have been complaining about the price of housing and how investors are snapping them up. However, one of the major reasons housing prices have increased, is because parents were pouring tens of billions of dollars into the deposits for their children, so that they could take larger loans. For instance, if a person needs 20% to get secure a loan for a 500K house, they need 100K cash. However, if their parents put in an additional 50K, instead of a 500K house, they can offer on a 750K house. Then, because more people can bid on it, the parents will add another 50K, so now they can bid up to 1 million.
However, rather than the original loan of 400K, they now have a loan of 800K, plus the 100*K they owe their parents. This wasn't too bad when interest rates were the lowest they have ever been in history, but as they moved up to around 6%, people are suddenly faced with having to pay tens of thousands more per year. Will their parents get their money back?
Chances don't look good.
While economic situations have changed since the parent's and grandparent's time, so too has culture. Our demand on what we expect life to involve has exploded, so has our taste for material things and "experiences" like travel, concerts and shows. A lot of the "influencers" who sell their lives online, are actually bankrolled by their parents too, likely telling the parents that if it all pans out and they get famous, they will be able to pay them back with even more. How many does that work out for?
What I suspect is going to happen, is that all of these trillions is going to be coaxed out of the weakest hands in history and pushed into the 0.1% pockets, as is the trend. Very, very few of the younger generations have the investment mindset, let alone behaviors to actually take an inheritance and grow it. Instead, it is just seen as more handout to spend on satisfying their desires and when they runout of inheritance, they will be in a mid-life crisis. Except they won't have money for sportscars, because they have invested nothing and chosen to work jobs to the bare minimum.
The wealth gap is going to be extreme.
Even more so than now. All that wealth that has been collected over the last 80 years, will be transferred into the accounts of the corporations and investors, by people who have been complaining that they haven't been given a fair go to build wealth. Rather than using the opportunity to build financial independence, they are going to likely give it up in order to satisfy their consumer habits instead, believing that regardless of how they act, they are entitled to be looked after by others.
Independence seems to be getting conflated with freedom, but that is not the case at all. Being independent takes responsibility, and there are consequences to shirking responsibility in order to satisfy wants. Eventually, if the younger generations fail to take care of their own finances, no matter how much money they inherit, their independence will turn into reliance again, except their parents won't be their to bail them out, nor have a basement for them to live in.
Taraz
[ Gen1: Hive ]
