April 2025
There’s an old saying that’s often tossed around: “The poor save, the rich borrow.” On the surface, it might seem counterintuitive. Isn’t saving money the responsible thing to do? Doesn’t borrowing come with interest, risk, and the stigma of debt? But dig deeper, and you’ll find a hidden strategy that reshapes how wealth really works in today’s world. This isn’t about recklessness or luxury—it’s about financial philosophy, asset behavior, and an understanding of how money flows through systems.
For many people, especially those from lower or middle-income backgrounds, cash feels like safety. It’s tangible. It’s what pays rent, buys groceries, and gets you through an emergency. Saving is often associated with security—and understandably so. When your financial future feels uncertain, having cash stashed away feels like an anchor in turbulent waters.
But for the wealthy, cash is not security—it’s erosion. With inflation silently eating away at the purchasing power of idle money, holding too much cash is seen not as safe but as inefficient. The rich know that cash, while liquid, loses value over time. What truly provides security is the growth and control of assets—especially those that appreciate faster than inflation.
Where most people see debt as a burden, the wealthy see it as a tool. It’s a concept known as leverage: using borrowed capital to increase the potential return on investment. When done wisely, borrowing money at a low interest rate to invest in higher-return opportunities creates a positive spread. In short, the rich borrow not because they have to—but because it allows them to accelerate their wealth without liquidating assets or triggering tax events.
Consider this: a wealthy investor might take out a $1 million loan at 4% interest to invest in a real estate portfolio that yields 8%. That’s a 4% gain on someone else’s money. Meanwhile, their own capital remains untouched, continuing to grow elsewhere, often in diversified assets like stocks, private equity, or business ventures.
The concept sounds simple—so why can’t everyone just do it? The short answer is: access. Wealth unlocks better credit terms, lower interest rates, and opportunities not available to the average person. Banks trust the rich to repay because they have assets to back the loan. The poor, by contrast, often face higher interest rates or may not qualify for meaningful credit at all.
Moreover, it takes financial literacy and risk tolerance to make debt work in your favor. If you’re living paycheck to paycheck, taking on debt can spiral quickly. For the wealthy, borrowing is calculated. It’s rarely done out of necessity. It’s a chess move—not a fire escape.
One of the most overlooked reasons why the rich prefer borrowing to spending cash is taxes. Selling assets often triggers capital gains taxes. Instead of selling a stock portfolio or a piece of property to raise cash, the wealthy can borrow against it—taking out a loan using their assets as collateral. This allows them to access liquidity without paying taxes on gains.
This strategy, often referred to as “buy, borrow, die,” enables the rich to accumulate appreciating assets, borrow against them tax-free, and then pass those assets on to heirs—who may even receive a step-up in cost basis, effectively wiping out decades of capital gains. It’s not loophole-hunting; it’s long-game financial architecture.
For those looking to grow wealth, the lesson isn’t to rush out and take on debt. It’s to reframe how you think about money, assets, and the role of capital. Cash isn’t the end goal—it’s a bridge. The wealthy focus on asset growth and cash flow, not just savings accounts. They prioritize ownership, scale, and strategic borrowing to maximize returns and minimize tax burdens.
Ultimately, the divide between how the rich and poor treat money isn’t just about income. It’s about mindset, tools, and access. By understanding the mechanics behind the strategy—why the rich borrow and the poor save—you gain a glimpse into how generational wealth is built not through luck, but through deliberate, informed decisions about the flow of money.
Money isn’t just something you earn. It’s something you direct, shape, and mobilize. The rich avoid holding too much cash not because they don’t value security—but because they understand that true financial security comes from using money to buy time, freedom, and growth. And that’s the kind of conversation worth having.
