Is Your Network Really Your Net-worth?

Here's how the socioeconomic status of your friends impacts your finances

Photo by krakenimages on Unsplash

“A broken clock is right twice a day” is a saying that applies to online influencers.

There are certain hustle culture personalities that are so cringy that my reflexive response to almost everything they say is a wildly exaggerated eye-roll.

A common saying among hustle-culture and ‘online business’ influencers (e.g., a person who sells a course) is, “Your network is your net worth.”

They often go on to clarify that if you want to be successful, surround yourself with people who are more successful than you are.

I’ve long rejected this notion because It’s not your friends’ job to make you money; it’s their job to care about you and support you. Some of the kindest, funny, and easy-to-be-around people I’ve ever met don’t make a lot of money. I’ve always regarded the idea of dropping people I care about from my life because they don’t have money as something a complete sociopath would do.

“Your network is your net worth” is something I only hear from those cringy influencers that I dismissed as totally baseless—which is usually a safe assumption with people selling you an online course on how to become wealthy.

The most interesting aspect of the Calling Financial Bull$hit series is investigating claims that I had never gave a second thought.

But, there is research that backs up the idea that having a group of high-income friends can increase your likelihood of building wealth.

Friends with benefits

A 2024 research paper titled "Friends with Benefits: Social Capital and Household Financial Behavior" is a deep dive into how our circle of friends can influence some of our most crucial financial decisions, like whether we invest in stocks or how much we save.

The researchers, using a mountain of Facebook data, peeled back the layers of how our friend circle impacts our financial decisions and revealed insights that could help us all make better financial choices.

The researchers wanted to answer a simple question:

Does socioeconomic status (SES) affect our financial behavior?

To answer that question, the researchers sifted through Facebook friendships, zeroing in on what they call "Economic Connectedness" — essentially, how connected you are to friends of high SES. They didn't just stop there; they also looked at how tight-knit our friend groups are (a term they call Cohesiveness) and how involved we are in our communities (Civic Engagement).

By marrying this data with IRS records on household finances across the U.S., they crafted a detailed picture of how these dimensions of social capital play out in real-world saving and investing behaviors.

Yes, having rich friends does appear to rub off on our financial choices

Here’s what the researchers found.

Economic Connectedness

They discovered that having a network rich in high-SES (socioeconomic status) friends does lead to better financial choices.

Specifically, a one standard deviation increase in Economic Connectedness correlates with a 2.9% higher likelihood of stock market participation and a 5.0% higher likelihood of saving participation. '

This suggests that the more you're connected to wealthier people, the more likely you are to save money and put that money to work in the stock market.

Impact of High-SES Exposure vs. Friending Bias

The study differentiates between simply having opportunities to mingle with wealthier people (High-SES Exposure) and the actual formation of friendships with them (which they call Friending Bias).

They found that High-SES Exposure has a significantly more substantial impact on financial behaviors than Friending Bias, indicating that being around wealthy individuals, even without forming close friendships, can positively influence one's financial actions.

So, no, you don’t need to dump your friends who aren’t wealthy.

But, perhaps there is real value in —and forgive me for using a word I absolutely despise— networking with rich people.

What’s really going on here?

The researchers discuss their theories on why they think connecting with rich people might help improve your financial decision-making.

One of the primary reasons suggested is the facilitation of learning and information sharing.

The first is that there is an opportunity to learn from people with money—particularly those who acquired money without being born into a rich family.

Essentially, rich friends can act as a source of financial education and encouragement, sharing their experiences, successes, and failures, which can demystify the process of investing and saving.

But always fact-check financial advice from a seemingly rich person you meet at a party, and never confuse being good at making money with being good at managing money. Doctors and lawyers are high-income earners who are notoriously bad with money.

The paper also suggests that being around rich people can lead to the adoption of financial behaviors through norms and behavioral mimicry.

If you’re around people who talk about saving and investing, you are more likely to engage in those activities, too. The researchers refer to this as “social mimicking,” but it's as simple as “monkey see, monkey do.” Your brain starts sending you the message:

“Rob is rich. Rob Invest in Stocks. I invest in stocks and be rich too.”

We did evolve from apes, after all.

Another factor the researchers touch on is the role of trust and confidence in financial institutions.

For obvious reasons, people with money are more likely to trust banks and other financial institutions like the stock market.

People who don’t invest in the stock market are more likely to tell you that “the stock market is rigged" and more likely to tell you the pile of money they have made by investing and doing nothing.

If you adopt a similar mindset about investing, you’re more likely to get off the sidelines and start putting money in the market (the first step to building wealth.)

Is “Your network is your net worth” Bull$hit?

While I seriously doubt many of the people who will say this to you have actually looked at the evidence—I must admit there does appear to be compelling evidence that spending time with wealthy people can rub off and increase the chances of saving money and investing in stocks.

I think what we can learn from this research is that networking with financially successful people is a good idea.

But that does not mean you should drop any of your friends just because they don’t meet your definition of success. Never forget the primary function of a friend is to be a good friend not a business associate.

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This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.