Let’s not mince words: by most measures The AJC Family is Rich!
But, does that mean that our children are rich? Does it mean that Mom and Pop will buy them cars, vacations, etc.?
The inspiration for this post comes from a comment (on a post by Diane about her car), where Debbie says:
I think most 16 year old’s get cars these days.
I had one before I turned 17, although I had to pay for it with my own money and get my own insurance (but I think the trend is now parents buying their kids first vehicles and insurance from what I’ve been seeing and in fact- I wrote a post about how teenagers are in the perfect position to put aside some money during their high school years on Wisebread.com and do you know the comments I got?!
Parents saying that the idea was ridiculous, kids shouldn’t be expected to save the money they earn on jobs nor would they do it if they understood the value of compound interest and how much those first few thousands would be when they were ready to retire; if kids work during the summer how will they take trips to Europe and attend soccer or music camp, etc. I am still in shock!)
I must admit that I am in ‘shock’ as well …
… but, this brings me to an interesting point: how do ‘rich parents’ bring up their kids?
After all, when you all reach your Number, maybe you need some guidance as to how YOU should face these same issues?
All I can tell you is what we do:
We are in one of the highest socio-economic levels, yet our children (11 and 14 years old) already know that if they want cars, they will need to buy their own. We will contribute (prob. up to 50%) … but, they will need to save up their portion and fund the running costs.
I’m guessing that most of you reading this blog had to do it the same way (?) … at least we had to, so why shouldn’t they?
We feel that just because your parents are ‘rich’ doesn’t mean that YOU are … at least these are the conversations that we have with our children 😉
We feel that the best FINANCIAL gifts that we can give our children are:
a) Teaching them to take sole responsibility for their own financial situation, and
b) Teaching them how to become rich on their own
… we hope, leading them to the type of confidence and independence that only self-sufficiency can provide.
Think about the second one: what an advantage is it to have parents who have gone from $30k in debt to $7million in the bank? It’s got to be better than reading a blog, or having an occassional mentor … of course, the disadvantage is the child’s natural inclination to rebel from their parents, so, we add a couple of extra advantages:
c) We pay for their formal education. 100% … no “if’s” and “but’s”, for any course, in any reasonable location (we’re not sending them to Switzerland to go to Finishing School!) as helps them achieve their academic goals … but, only their first ‘real’ degree. If they want to sacrifice current earning potential for future by earning Masters, PHD’s, and/or MBA’s, that’s their financial trade-off to make, and
d) [AJC: This is the secret advantage that we do NOT tell them about up front] They will never starve … if all else fails, we are their Safety Net. But, they will not be able to “mooch off the folks” … this is simply an ‘insurance policy’ against disaster.
To that, we add all the ‘normal’ non-financial parenting, PLUS the luxuries of private schooling; after-school activities; bedrooms with private bathrooms, robes and studies (equipped with MacBooks, of course!) for each; as well as the swimming pool, tennis court, travel, etc. lifestyle that living in a ‘rich household’ provides …
What do you do (or plan on doing) with your children?
I saving now for the college education of my 3 yr old, however, I expect my child to still work while in school.
But what I will give most to my child, is good financial resources, books, tools, and knowledge of how to create income streams and invest in stocks.
Passing on knowledge is the best investment
Yeah I agree with your methods Adrian. We actually, however, have already told Quinton well in advance that if he wants a car, he must save up and purchase his own and pay for his own gas. We’ll provide insurance coverage, but if he gets traffic tickets, he pays any ‘increase’ in the insurance premiums.
I could never for the life of me understand why parents purchase their kids vehicles. I just feel that moves like that does kids the greatest disservice by not allowing them to earn, learn to pay cash and achieve financial goals.
Passing down a good financial education and the ability to go out and get what you want in life is what will make you give all of your wealth to charity when you pass on, because your kids will be wealthier than you when they get older! 😉
I really liked this Money article on financial incentives for kids:
It recommends tying $ you give to them to their performance for a third party such as an employer. It’s an interesting idea. I had planned to give them a “matching” Roth IRA contribution for my kids once they were old enough make their own income, so that I have a hands on way of teaching them how to invest in stocks.
I could see paying for insurance for long enough to insure that the kids to learn to drive safely (borrowing a family car) but if they want their own car they can pay for it themselves.
I don’t have kids yet, but this is a great reminder of how our kids need premeditated financial education. I’m definitely with you on teaching kids responsibility. Rich or not, kids should learn the value of work.
I married a man who was the son of rich parents and rich grandparents. He didn’t have a lot of motivation, but I liked the fact he was not a workaholic. Divorced now, I do not know how his parents and grandparents’ trust funds have fared, both with the economy and with is father’s aging (a topic for another post, Adrian? How to help the aging parent who’s used to controlling the funds but perhaps has lost his cognitive ability and no one has recognized that decisions are impaired? But I digress…)
Recently, he has mentioned to me that the boys are not going to be able to go to school (college) if he himself is not able to continue to work (health problems, I assume, given his past). Which means he’s been freely spending the child support and not saving it to support their future education, and possibly that he has psychologically relied on his grandparents’ and parents’ trust funds as a cushion for his own old age (and his sons’ getting into college). I am not sure how you can prevent that kind of thinking when one is used to the parents’ being there to help out whenever.
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I plan to and have provided for my children , but would never buy them a car. as a child growing up, i rarely even got to drive the family car, and never would my parents buy my car. its a learning experience every child should have. I would add 1 more item to this. I cannot see allowing a child to have a credit card(as many parents do) this is foolish.(in my own opinion)
I come from a large, struggling family. When I was 16, there was no access to a car, no contributions, nothing. I was forced to look for a job, but didn’t find one because I really wasn’t interested. When 17 came, my parents showed a considerably different attitude in my driving interests. As far as education, every responsibility is in my hands, I have no real aide from parents. I’ve learned that you must get there on your own and if it’s harder along the way, then you’re more disciplined for it.
@ Jerel – I came from a middle-class family that acted like it was upper-middle-class, so our issues (hence, part of the basis from which I write) are not necessarily the same as yours … thanks for sharing you perspective which I am sure will reach readers whom I am unable to reach!
Rich Dad. Rich Kid?-