What the wealthy and ultra-wealthy spend their money on

What grabs the attention of the wealthiest people in the world? Who are they? And where did all that money come from?

Both the number of wealthy individuals and their collective wealth increased by about 2% last year, according to a new report from Wealth-X, a company that tracks global wealth. There were 23 million high-net-worth individuals globally in 2018, with a combined net worth of $62 trillion.

The majority are self-made and live in the United States, which claims 40% of the world’s wealthy population.

Even among the rich, there are categories of wealth: There’s the high-net-worth and then the ultra-high-net-worth. Wealth-X tracks high-net-worth individuals, or people who have net assets between $1 million and $30 million. The majority are clustered at the bottom, with nearly 90% of high-net-worth individuals’ worth between $1 million and $5 million.

Ultra-high-net worth individuals are considered to be those who are worth more than $30 million.

What do they spend their money on?

The world’s richest people give a lot of their money away.

Philanthropic giving is one of the primary pursuits of the wealthy, particularly among the ultra wealthy, with 36% of the rich, and 57% of the super rich pointing to charitable giving as one of their top interests.

For most high-net-worth individuals giving is a priority. After a dip in the wake of the global financial crisis, philanthropic giving has recovered. Still, as a proportion of net worth, the wealthy give far less than people of more limited means, according to the report.

Last year the ultra wealthy made several high-profile mega-gifts. For example, Jeff and MacKenzie Bezos donated $2 billion to the Day One Fund to help the homeless, and Michael Bloomberg gave $1.8 billion to his alma malter, Johns Hopkins University, for financial aid.

For America’s wealthiest, giving may be slowing due to economic concerns and the impact of the 2017 Tax Cuts and Jobs Act. The legislation increased the standard deduction. This, in turn, is expected to reduce the number of tax returns itemizing deductions for charitable gifts from about 37 million before the law went into effect to about 16 million in 2018, according to the Tax Policy Center.

The most popular charitable causes among the wealthy last year included those supporting education, social services, arts and culture, and health.

But giving comes second to business among the passions, interests and hobbies of the world’s wealthiest. After philanthropic giving, the wealthy are interested in finance, followed by sports and the outdoors, according to Wealth-X.

Looking more in depth at which sports and activities the wealthy enjoy, the overwhelming favorite is golf, followed by football, skiing, basketball and baseball. The researchers noted that these sports reflect the impact the US has over the world’s high-net-worth population.

Interest in family, politics, animals and languages are at the bottom of the top 20.

Who are the wealthiest people?

Overwhelmingly, the wealthy are still men. Only 16% of high-net-worth individuals are women. Of ultra-high-net-worth individuals, only 14% are women.

Just over 40% of them live in North America, while a quarter live in Europe and another quarter are in Asia. The United States has the most high-net-worth individuals, followed by China, Japan, Germany and the United Kingdom. The top 10 countries accounted for three quarters of the global high-net-worth population, and just under three quarters of total high-net-worth wealth in 2018.

New York City has the most high-net-worth people of any city in the world, although the number shrunk by about half a percent in 2018. Still, with just under a million high-net-worth individuals, New York’s wealthy population is 65% larger than the city with the second most, Tokyo.

Hong Kong has the largest population of ultra-wealthy residents, becoming the first city to have more than 10,000 ultra wealthy individuals after overtaking New York last year.

But the high-net-worth population in Hong Kong dropped by more than 11% in 2018, partly as a result of markets in Hong Kong and China reacting negatively to trade uncertainty between the US and China.

Countries with the largest expected growth in high-net-worth individuals in the next five years include Nigeria, Egypt, Bangladesh and Vietnam.

How did they make their money?

Only a small percentage of the world’s richest people inherited all of their money. The majority are responsible for self creating some or all of their fortune, according to the report.

Nearly 84% of high-net-worth-individuals made their own fortunes. Only about 5% completely inherited their money and about 12% have a fortune that combines inherited and self-made wealth.

A higher proportion of the ultra wealthy have inherited their wealth, with about 30% receiving some or all of their fortune from inheritance, and 70% creating their own wealth.

The report points out that that while inequality has increased in recent decades, over the past few centuries inherited wealth has declined and the proportion of wealthy individuals whose fortunes are predominantly self-made continues to increase.

Among industries that the wealthy work in, finance, business and investing came first; followed by manufacturing; technology; business services; and construction.

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