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:
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 🙂