Your financial success mainly depends on your pedigree, new study finds

Nothing captures the American Dream quite like a rags-to-riches story. But lessons from across the pond suggest the days of becoming a self-made millionaire are disappearing.

New research from the Institute for Fiscal Studies (IFS) found that family wealth plays a major role in determining people’s financial success in the U.K. And it begins from an early age.

For example, men born between 1986-1988 who grew up eating free school meals earned £7,700 ($9,400) less by the age of 28 than men who did not. For women, the difference was almost £10,000 ($12,200).

Eating free meals at school is an indicator of lower socioeconomic status. For millennials, it signals a steeper uphill climb to financial success.

The real wealth divide occurs later in life when people can collect inheritances from their parents.

According to IFS, growing inheritances will make it much more difficult for lower-income people from younger generations to amass fortunes the way their parents did.

Inheritances have doubled in size over the past 20 years, thanks largely to soaring property values. But passing down bloated properties isn’t the real problem.

The bigger issue is the growing chasm between rich and poor and how difficult it’s becoming to break the cycle of poverty.

That’s not just a U.K. problem but one that people are experiencing all over the world.

A bleak financial future for would-be billionaires?

With or without inheritances, Americans typically display outsized confidence in their ability to amass a fortune over their lifetime.

According to a 2022 survey by Magnify Money, some 44% of Americans believe they’ll become wealthy in their lifetime—this figure is 72% for Gen Zers, or those born after 1997.

Another 2022 survey from Harris Poll found that 44% of American adults believe they can become billionaires. As crazy as that sounds, it demonstrates that Americans want—and generally believe they can attain—life-changing wealth.

While the percentage of Americans who say they can go from rags to riches is high, it started to decline over the last few years (it was 51% back in 2019, according to the Magnify Money survey).

That’s because even America, the bastion of capitalism, has seen growing resentment toward the ultra-wealthy.

This negativity culminated during the 2020 election cycle as calls to “tax the rich” grew louder. President Biden has even proposed a billionaire tax that calls for a 25% tax on all wealth over $100 million.

For now, self-made millionaires dominate America

Nearly four out of five millionaires today are self-made, according to Ramsey Solutions, a company founded by personal finance expert Dave Ramsey.

A study published in 2019 by Wealth-X also found that more than two-thirds of individuals with a net worth of $30 million or greater are self-made.

The profile of people who’ve amassed personal fortunes has also changed over the years. Today’s self-made millionaires are often investors, entrepreneurs, and people in high-tech industries—not exactly the old money stereotypes depicted in The Great Gatsby.

The number of millionaire households in America has been growing steadily over the past decade. Today, it’s estimated that nearly 24.5 million millionaires live in the U.S.

Granted, a large part of that wealth is concentrated in real estate, but the old guard is shifting as new wealth opportunities present themselves.

The IFS study shines a much-needed spotlight on how wealth inequality from an early age can set the tone for the rest of people’s lives.

But it fails to factor in the new, lower-barrier wealth opportunities borne out of the digital age.