Why Having Wealthy Friends Could Matter to Your Finances

It’s Who You Know

Having friends who are well-to-do affects economic mobility, according to new research from the bipartisan think tank Economic Innovation Group (EIG).

Communities with higher educational achievement and financial well-being have more of what the researchers refer to as ‘social capital’, which positively affects an individual’s economic standing. Other communities might face barriers to accessing the same kind of network, which in turn negatively affects their prospects for social mobility.

Bridging Connections

The researchers are putting hard numbers on these findings: For example, they say that those born into low-income families could see an average 20% increase in income if they grew up in areas with higher levels of interaction across socioeconomic levels. In other words, places where you’re more likely to make wealthy friends. They call this measure economic connectedness.In other words, places where you’re more likely to make wealthy friends.

This may be because economic opportunities can come from people that you know closely, including friends, classmates, or neighbors, in the form of college letters of recommendation, job offers, or introductions. And these gestures appear to be more common in wealthy zip codes than in lower-earning communities. That’s also why the issue of inequity when it comes to economic connectedness is an issue of race equity, with lower-income neighborhoods often disproportionately Black and Hispanic.

Areas with a low level of cross-class friendships tend to be poorer than areas where it’s common to have friends across different income levels, social classes, or education levels, per EIG. For example, California’s affluent Silicon Valley is also home to the ten U.S. zip codes with the highest level of economic connectedness. Meanwhile, communities experiencing economic hardship may be more isolated, and residents often lack connections across income levels.

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