I recently finished two books about poverty – Evicted: Poverty and Profit in the American City by Matthew Desmond and $2.00 a Day: Living on Almost Nothing in America by Kathryn Edin & H. Luke Shaefer. The stories that were shared within their pages will stay with me for a long time.
I’m not an expert on poverty and I’ve been fortunate enough not to experience the kind of poverty described in these books. After finishing both of them, the thing that struck me most deeply is the idea that intergenerational poverty is something from which it is almost impossible to escape. I say “almost” because I’ve also read Hillbilly Elegy: A Memoir of a Family and Culture in Crisis by J.D. Vance. And who among us hasn’t heard the story of how Oprah Winfrey started out in very, very disadvantaged circumstances yet managed to become a multi-billionaire?
My impression after reading these books is that the majority of people who are born into intractable intergenerational poverty do not have anyone in their lives who has money, or other financial resources, that can be given or lent in order to assist them to move out of poverty. Most people in this situation do not escape the desperate poverty in which they live nor are they ever in a position to help their family escape from it either.
Intergenerational poverty appears so intractable to me because I interpret it as a complete absence of a financial infrastructure. What do I mean by a “financial infrastructure”? Simply this – it is a person’s ability to access financial resources.
On the other side of spectrum is intergenerational transfer of wealth. My definition of the intergenerational transfer of wealth is that one generation in a family transfers wealth down to the next generation, traditionally from parent to child.
I’ve noticed that, very often, the concepts of a financial infrastructure and the intergenerational transfer of wealth are very tightly linked. Throughout my life, I’ve had the opportunity to observe and learn from examples of people who have a financial infrastructure and who have benefitted from the intergenerational transfer of wealth. And while I always knew the families in my circle weren’t all equally rich, I didn’t know anyone who did not have the ability to access money from somebody if it was really, really needed. I never would have articulated it this way as a child but I inherently understood the idea that those who have a financial infrastructure and those who can benefit from an intergenerational transfer of wealth are in a position to get money when they need it.
My parents weren’t rich, but my maternal aunt had a farm. When my parents were a young couple with a new mortgage and young babies, my aunt would raise some chickens just for them and my parents would fill their freezer with meat. Since my parents had a large backyard, they planted a garden and canned vegetables for the winter. The availability of these financial resources meant that my parents lowered their grocery bill, thereby saving money, while feeding their family. They might not have been living large, but they weren’t living above their means and they were able to set a few dollars aside every paycheque to build a money-cushion for themselves. Eventually the mortgage was paid and those former mortgage payments could be redirected to other goals. The help from my aunt was part of my parents’ financial infrastructure. My aunt didn’t give my parents money, but she was able to indirectly help my parents to accumulate money so that they could meet their financial goals. My aunt was part of my parents’ financial infrastructure.
I know another person who worked in a retail liquor business during his undergrad. His graduation coincided with his boss’ retirement so his parents gave him the down payment to buy the liquor store from his boss and they co-signed his business loan. He worked his ass off to repay the loans to his parents and the bank and he is quite comfortable today. This is an example of intergenerational wealth – his parents had the ability and willingness to help him buy an established business so that he could support himself. Thanks to his parents’ financial resources, this person has been able to build a strong financial infrastructure for himself and his young family. This situation exemplifies what I mean when I use the term financial infrastructure – this man had the ability to access financial resources from other people. His life includes people with money. As a result, he is now a person with money and he will be able to both transfer his wealth to his own children and also be a significant part of their financial infrastructure until they are able to create their own wealth. It is this cycle of transferring money from parent to child for the purpose of acquiring assets that creates, maintains and increases intergenerational wealth.
Another friend started working a part-time job in her first year of high school to support her household and she’s worked hard ever since. Through her own efforts and her dedicated savings, she created her own financial infrastructure and relied on it to get her though university. Once married, she and her spouse were able to purchase land in the mountains and to build a rental property due to the assistance of her mother-in-law, who runs a business renting that propety on a year-round basis. My friend jokes that she and her family have a hard time using their own property because it’s always booked so far in advance. All kidding aside, my friend has benefited from an intergenerational transfer of wealth and the fact that she has created a strong financial infrastructure for hersefl. She and her husband share in the profits of the rental business. Both of them are careful with their investing. As a result, they are simultaneously strengthening their financial infrastructure and creating more wealth for themselves and their own children.
I know of several people whose parents were able to assist them with down payments on their first properties. One of my friends had parents who were able to give her the down payment on a condo when she graduated from university. My friend had a roommate to assist her with the mortgage but she eventually sold that condo when she moved into a larger townhouse. She then moved from that townhouse into her now-husband’s home. They sold that home and are raising their family in a very nice luxury home. Without her parents’ initial infusion of cash, it is unlikely that my friend could have saved enough money from her starting salary to build a sufficiently-large down payment which would have permitted her to buy before real estate prices skyrocketed. The money from her parents allowed my friend to benefit from the rise in real estate prices and to build equity that allowed her, and eventually her husband, to purchase their current home. This is yet another example of both intergenerational wealth and access to a financial infrastructure.
Again, I’m not an expert but it seems to me that intergenerational poverty is intractable and it prevents one generation from helping the next because there are no financial resources to be distributed when needed and there are precious few opportunities to accumulate those resources. It is incredibly detrimental to all who are its victims.
When I read Evicted, I was struck by the fact that the tenants portrayed in the book had no family with whom they could stay until they got back on their feet. The tenants’ financial infrastructure simply did not exist because they couldn’t access enough money to build one. For the most part, they did not have full-time wages and they did not have their own homes. Their family and friends couldn’t be counted on for help because they were similarly under-employed and they were also renters living in dilapidated structures that were only slightly better than being homeless. The tenants were at the mercy of their landlords, and they were essentially powerless in the landlord-tenant relationship. Their landlords knew that they could be easily replaced by someone who was just as poor and just as desperate. For a variety of reasons, the tenants could not pool their meagre funds with others in order to create a little bit of a safety net for themselves. In other words, they had no opportunity to create and build a financial infrastructure because they had no money that could be set aside for the future. Whatever meagre income they received went to their rent, their food, the basics of survival. There literally was no money leftover for the proverbial rainy day, and it was always raining in their lives in one way or another. The tenants depicted in Evicted did not appear to have any way out of their abysmal situations beyond winning the lottery. No one in their respective circles had financial resources. The seeds of a financial infrastructure and intergenerational wealth simply did not exist.
The story was even worse for the people described in the book $2.00 a Day – which translates into $730 per year for those who like to do the math. These poor people were literally starving, and they were forced to make horrible choices in order to survive from one day to the next. They did not have family members who could help them with a down payment, who could raise food for them, who could help them find a job or to start a business. More often than not, the people of $2.00 a Day were born into poverty and were raising children in poverty. There didn’t seem to be an end to the cycle as there was no way out without cold hard cash. It made me so sad to realize that many of the people living in the horrid conditions described in the book simply couldn’t begin to build a financial infrastructure for themselves or their children because they had to devote so much energy – mental and physical – to basic survival. They did not have the luxury of “big-sky thinking” because they were so worried about living without food, water, electricity, etc…
This blog is about money so my comments are limited to the financial impressions that these books left on me. There are many layers to the problems faced by the people in these books, so forgive me for simplifying. All of the people in both books had many issues and challenges that needed to be resolved and I don’t want to create the impression that all of their problems could have been solved with money. However, having money would have meant that their issues and challenges would have been addressed, even if not solved, because they would have had the ability to seek the help that they needed. If the people in these two books been able to access sufficient financial resources, then they would also have been able to address the other problems in their lives without losing their homes, their children, or the basic necessities. They would have had a financial harbour while they sorted things out.
Did the books’ subjects have any examples in their lives of people who had made it out of poverty? I don’t know – the authors were silent on that question. In both books, the only people with money were the landlords and they were not portrayed in a favourable light. Neither book gave any indication that any of the landlords had ever been in the position of their tenants. Beyond the landlords, the impoverished subjects of each book appeared not have had any exposure to anyone who had overcome dire financial circumstances or who could teach them how to get out of poverty.
Whether you choose to read the books is up to you. What I want to impart to you is that you should carefully consider your own financial infrastructure and assess your own access to intergenerational wealth. If you lost everything in a fire, do you have insurance in place so that you can start over? Do you have family or friends who could put you up until you get back on your feet? Do you have a source of passive income that can tide you over if you lost your employment? Are you the kind of tenant that a landlord wants to keep? Are there people in your social network who could help you find job leads if you needed them? If you wanted to start or buy a business, are there people in your life who could help you fund that dream if necessary?
What are you doing to build your own financial infrastructure? Is building intergenerational wealth important to you?