Most wealthy families lose all their money in less than three generations. Why?

The vast majority of families who have struck gold, so to speak, lose it all within the span of only a few generations. Odd as it may seem, this is not uncommon. The first generations builds the wealth, the second generation expands the wealth and the third generation spends the wealth and has to begin again.
Historically, this process of pauper-to-prince-to-pauper has been referred to as going “Shirtsleeves to Shirtsleeves,” a term first used in the late-16th century and popularized in the 1800s. Many cultures around the world have used similar expressions for an equally long time with the best being from Japan, “Rice paddies to rice paddies in three generations,” and from Scotland, “The father buys, the son builds, the grandchild sells and his son begs.” In the Netherlands, its use of the phrase “Clogs to Clogs” takes honorable mention.
Nearly every study ever conducted on this topic, no matter the other variables considered, has shown the same thing: 90% of all wealthy families lose their wealth within three generations.
Nine out of 10. For several centuries at least and still ongoing.
For more on protecting family wealth, check out our new article this Thursday.