5 Things the Upper Class Pays For in Cash That the Middle Class Doesn’t

According to the Pew Research Center, the upper class includes any household with an income that’s at least double the national median. This middle-class median household income in the U.S. in 2022 was reportedly $74,580.

Generally, though, the upper class is viewed to be one notch above the upper middle class, which includes households earning an income of roughly $150,000 to $250,000. However you define it, one thing’s for sure: The upper class is in a good position to buy things in cash that people in the middle class — those who earn around the national median — can’t.

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But what exactly are people in the upper class paying for in cash ? Here are some of the big ones.

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Cars and Boats

Luxury vehicles can go for $100,000 or more, which is why middle-class earners don’t generally pay for them outright. The upper class, meanwhile, has a bit more flexibility with their money.

“The wealthy have accumulated enough disposable income that they can bypass financing and pay outright,” said Nischay Rawal, a certified public accountant with NR Tax & Consulting . “As a CPA, I often see high net worth clients purchase luxury vehicles [and] boats in cash…For example, one client recently purchased a $200,000 sports car and paid cash.”

Paying in cash for these things means no interest charges, which is a strategic way to save. Plus, many dealerships are more willing to negotiate for better prices when more cash is on the table.

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Real Estate

Real estate isn’t something just anyone can buy in cash. The median sales price of homes sold in the U.S. is $420,800 , but many properties — particularly luxury homes — cost much more than that. According to Redfin , the median sales price of a luxury home in the U.S. was $1,225,000 in the first quarter of this year.

But for the upper class, buying a home in cash is not only feasible but financially smart. After all, cash purchases mean no mortgage loans and no interest payments over time.

“The upper class often uses cash for purchases where liquidity and the avoidance of financing complications provide strategic advantages,” said Dennis Shirshikov, head of growth at GoSummer and a finance professor at the City University of New York.

“Wealthy individuals frequently pay for real estate in cash, particularly for luxury properties and investment properties,” he continued. “This practice allows them to bypass the mortgage process, avoiding interest payments and gaining a competitive edge in hot markets where cash offers are more attractive to sellers.”

Unlike the middle class, upper class earners are also more likely to have vacation or secondary residences. While some might use financing to purchase these, they may also end up paying in cash.

Private Tutoring & Higher Education

The average cost of attending a four-year public university is $108,584 , including tuition, books and supplies, room and board, and other school fees. Private schools average at $234,512 over four years.

These are areas where the middle class rely much more heavily on student loans, but they’re much less of an issue for wealthier individuals.

In Shirshikov’s experience, upper class earners tend to handle academic expenses — like private school tuition, specialized tutoring, and higher education — in cash. Not only does this negate the need for loans or interest-bearing payment plans, but some institutions also offer discounts for upfront payment. At more competitive schools, it can also cut out any wait times for enrollment.

Expensive Collections

Money’s not really a concern for many upper class individuals, so they can — and often do — buy expensive collections in cash. This includes antiques and expensive art pieces, among other things.

“I have clients who are art collectors, vintage car collectors, and exotic animal collectors,” said Rawal. “Purchasing these types of collections in cash allows them to obtain rare, highly sought after pieces.”

Travel

The cost of travel has risen over the years, but middle-class households can typically still afford to take an annual trip or two without necessarily relying on credit.

Bespoke travel or luxury vacations are an entirely different matter. These trips can easily cost tens or even hundreds of thousands of dollars, which puts them out of reach for most middle-class families and even some upper class earners.

“The upper class often funds expensive travel experiences, such as chartering private jets or booking extended luxury vacations, with cash,” said Shirshikov.

Luxury cruises and extravagant vacations to exclusive destinations are also relatively common, particularly amongst truly affluent individuals.

“One client chartered a private jet to take family and friends to their Caribbean Island villa for a week-long birthday celebration,” said Rawal. They paid nearly half a million dollars for that experience.

This article originally appeared on GOBankingRates.com : 5 Things the Upper Class Pays For in Cash That the Middle Class Doesn’t