Different income levels have different consumption habits. For the upper class in the United States, with high incomes, they have the ability to pay for things in cash, while the middle class may not have enough cash to do so.
How do we define the upper class? According to data from the Pew Research Center, the American upper class refers to households with incomes at least double the median income of the national middle class (those around the national median income). Reports indicate that in 2022, the median household income in the United States was $74,580.
The upper middle class in the United States includes families with incomes ranging from approximately $150,000 to $250,000.
What do people in the upper class purchase with cash? Here are some high-value items.
Some luxury cars can cost $100,000 or more, making it difficult for the middle class to pay in cash directly.
“Rich people have accumulated enough disposable income so they can bypass financing and make payments directly.” Nischay Rawal, a registered accountant from NR Tax & Consulting, told the financial website Gobankingrates, “As a registered accountant, I often see high net worth clients purchasing luxury cars and yachts with cash…For example, a client recently bought a $200,000 sports car and paid in cash.”
Paying in cash means no interest, which is a cost-saving strategy. In addition, cash payments also have a better chance of getting discounts.
The average home price in the United States is $420,800, whereas according to Redfin data, the average price of luxury homes in the first quarter of this year was $1,225,000.
Dennis Shirshikov, Growth Manager at GoSummer and finance professor at the City University of New York, told Gobankingrates, “Wealthy individuals often purchase real estate with cash, especially luxury properties and investment properties.”
“This approach allows them to bypass the mortgage process, avoid paying interest, and in cash offers, which are more attractive to sellers in hot markets, gain a competitive advantage.” He said.
In the United States, the average cost of attending a four-year public college is $108,584, including tuition, books and supplies, room and board, and other expenses. The four-year average cost for private schools is $234,512.
Children from middle-class families rely more on student loans, but for the affluent, according to Shirshikov’s experience, individuals in the upper class tend to pay academic fees such as private school tuition, professional tutoring, and higher education in cash.
In addition to the benefits of no interest and potential discounts, paying cash can also reduce admission waiting times in more competitive schools.
For many in the upper class, they use cash to purchase expensive collectibles.
“My clients are art collectors, classic car collectors, and rare animal collectors,” Rawal said. “Purchasing these types of collectibles with cash allows them to acquire rare and coveted items.”
Over the years, travel costs have been on the rise, but middle-class families typically still manage one or two trips per year.
Customized journeys or luxury vacations are a whole different story. These trips can cost tens or even hundreds of thousands of dollars, making them unaffordable for most middle-class families and even some in the upper class.
“The upper class often pay for expensive travel costs in cash, such as chartering private jets or booking luxury vacations,” Shirshikov said.
For those truly wealthy individuals, traveling on private luxury cruises or indulging in luxury vacations to exclusive destinations is common.