It seems that my Rich Dad. Rich Kid? post struck a bit of a chord with some of our readers; the post was essentially questioning whether your kids are rich – or should be – just because you are – or, will soon become 😉 – rich yourself?
The universal agreement seemed to be that the best financial ‘gift’ that a wealthy parent can give their children is education … particularly education about money; something about teaching children to fish …. ?
That leads me to Diane who suggested that I write a follow-up post, saying:
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…)
Let me deal with both Diane’s question and the whole ‘spoil the child?’ subject with two personal stories:
Firstly, Diane’s question about the aged dealing with finances is a real one that can only be solved with a willing ‘aged one’, some personal ethics, and an Enduring Power of Attorney:
My grandmother is 96 years young; she is in an old people’s home now – having just moved from her retirement village (i.e. over-55’s) due to an over-medication issue – her doctor’s fault. In short, she’s more capable than you or I.
She’s so capable, in fact, that in the last 2 years she personally engineered the sale of a substantial downtown property on behalf of herself and her partners, fetching a record price. She handled the realtors, the attorneys, and her partners herself. Period.
However, she also put in place a Power of Attorney (“just in case”) and has recently set up a trust fund to deal with the cash proceeds.
So, my experience is with somebody who is mentally capable of recognizing their own strengths – and weaknesses – and puts in place the appropriate strategies. She also recognized that my mother may not have the same capabilities so has set up a trust involving my mother and an attorney (not exactly how I would have set it up, but it’s not my call) to try and protect the assets for future generations.
So, my only counsel is that you have to put in place the safeguards, well in advance of the problem – with the elderly person’s consent … if they don’t want to play ball, well it’s their money …
… which brings me to the second personal story:
I am one of three siblings, having a slightly older sister and another sister a few years younger; neither of whom exhibit any signs of financial intelligence (one has no money, no job, no prospects, and the other has no money, a part-time commission-based job, few prospects, and gave away her house to a con-man despite warnings … ’nuff said) … since I have at least some sense of financial responsibility and a desire for self-sufficiency, I can honestly say that I can’t relate.
It was explained to me once by a professional why my sisters and I are so different (and, why I am now wealthy and they are now ‘broke’ … awaiting the next regular dose of parental hand-out): you see, my sisters believe that they grew up in a rich household … that was the impression that my father gave my mother, sisters, friends, bankers … in fact everybody but my grandmother and me.
He would live beyond his means then go to my grandmother for handouts to maintain his comfortable-to-upper-middle-class lifestyle (and support his usually failing business ventures), but he would tell me our true financial situation: just over broke.
Since finances were never discussed openly in our house, I didn’t realize that I was the only one who knew the truth … so, I simply grew up in a ‘poorer’ household than my sisters, which meant that I automatically worked every weekend and every vacation and bought all of my own clothes, cars, and saved for my own discretionary spending. My sisters, of course, simply held their hands out, as and when needed.
Therefore, as the professional explained it to me, I simply grew up responsible and my sisters didn’t. As things turn out, this ‘education’ was a blessing for me …
So, here’s where the two stories intertwine:
Early in my career, I still felt that I had a financial ‘safety net’ – even though my parents were struggling, there was always grandma in the background if things really went awry … not to mention a nice large inheritance surely to come ‘one day’.
Until I realized that (a) the family assets would need to be spread over more and more people as they (eventually) moved from my grandmother to my mother, [perhaps] then to my sisters and me, and (b) my sisters (and, mother) had a huge capacity to consume … so who knows if there will actually be any assets left if my turn should happen to come? That’s the time when I made the key decision to become truly self-sufficient: independently wealthy (you read how this came about, already).
This is the point: if you rely on a safety net, chances are that you will need one, but it won’t be there when you need it.
But, if you choose not to rely on a safety net – instead, choosing the path of self-sufficiency – you will end up creating your own safety net …
… and, if the inheritence happens to come through, you have the perfect means to start your own charitable foundation 🙂
I totally agree with your observations. My father grew up VERY poor – his home had a dirt floor and he slept on a couch or the floor growing up. This motivated him to work very hard, become successful and, unfortunately for me, spoil his children. I had so many problems with money while I was growing up and in college (durring which time my father paid all my expenses and gave me a considerable allowance). I got married right out of college and soon afterwards my husband quit working to go back to school. I had to support the both of us on a tiny salary.
To this day I am so, so glad it happened. I feel were it not for such a huge, paradigm-shifting event, such as going from being fully provided for financially to being the sole provider for 2 people on a small salary, I might always have been bad with money. Having all financial support pulled out from under me at once was so dramatic a situation that it consumed all of my focus – I became obsessed with personal finance and investing. I’m now quite happy with my financial successes and my family still can’t believe that my financial behaviors could change so drastically.
It’s because of this that I’m determined my kids will know the value of a dollar. No allowances! If they want to go shopping or out to the movies with friends, or go to a concert, they’re going to have to work for it. And I want to be sure they never take their quality of life for granted and understand that a roof over one’s head and 3 meals everyday costs quite a bit. I feel like a lot of things in my early life would have been easier if I’d learned those lessons earlier.
Nice Posting Adrian. I don’t know if I could have said it any better.
You see, I have witnessed and heard ,so many people always talking about and in many cases (doing)providing for their Grown children. It saddens me as I personally know of a few cases where Kids become depend ant on these hands outs , and never grow to be self disciplined. They therefore, end up doing little to nothing as they wait for that inheritance money to filter to them.
Its always wonderful to know people love their kids enough to want to provide the best for them, but I believe the best you can provide them is that education.
I will provide for my kids ,but in a limited way (financially) as I try to instill a sense of responsibility in them.
@ Sara/Steve – Thanks for the comments!