If you want to raise better adjusted kids, you probably want to practice some level of stealth wealth so that they don’t grow up spoiled and unable to recognize prosperity.
A couple readers have pointed out that I was raised rich given I had two parents with stable jobs. Instead of having to walk, I got to ride a bicycle to school. I even got a 486 desktop computer my junior year.
Yet, I wasn’t unable to recognize I grew up rich because my parents drove an 8-year old Toyota Camry and we lived in a modest townhouse for the four of us.
Thanks to my parent’s frugal ways, I was highly motivated NOT to mess up my life by slacking off in high school and college. My parents simply did not have a large enough financial buffer to overcome a deadbeat son.
Being unable to recognize their wealth also pushed me to attend a public university, which turned out to be a financially sound choice. If I had attended a private university, I would have felt too much guilt and pressure to prove the expense was worth it.
I still wonder to this day whether my parents are actually much richer than they’ve led me to believe.
My dad still drives a Toyota he bought in 1997. My parents still live in the same old house since 1980. They also never buy any new clothes or luxury items. If there is an early bird special at 4:30pm, my parents are first to get in line!
The Easiest Ways To Stealth Wealth
The easiest ways to stealth wealth are to drive an old economy car and never wear anything expensive. By doing so, you can still send your kids to private school, join country clubs, and go on nice vacations without raising too much suspicion from the outside world.
But what if you are a strong believer in real estate as an investment, don’t like stocks or any other type of asset class as much, and want to protect your children from spoiling? Screw what the outside world thinks. You’ve also got enough capital to buy a luxury home.
The answer is simple: own a modest primary residence that is no larger than the median-sized home in your city. With your excess capital, buy a second residence as a rental home, second home, or office.
For example, let’s say you live in Austin, Texas where the median home price is ~$370,000. You have the ability to buy with cash one very nice $800,000 home to live in a better neighborhood and gain more real estate exposure. After all, you believe Austin is going to be the next San Francisco.