Before the New Year gets here, I want to ask you to think about sharing some money truths with your family.
NOT the ones your parents told you, in most cases, but the ones that really are true. You see, as a tax professional, I see the same old (bad) money habits being transferred from one generation to the next, over and over again,
Can we “resolve” to stop that?
Can we create more intelligent consumers and stewards of money with the next generation? I believe we can. So today, I’d like to touch on some of the half-truths I hear from otherwise smart people – and how we can stop it.
- Kids Need An Allowance. Not. At. All. You can certainly pay your kids for handling certain tasks around the house, but at the same time, they also need to realize that, for example, “if you made the mess, you have to clean it up.” I think it’s foolish to financially reinforce that meeting a standard – such as keeping their room clean – is a quantifiable reason to be paid. On the other hand, for older kids, you can certainly think about paying them a fair “wage’ for things done around the house – taking care of the lawn or cleaning the common areas of the house weekly. But just randomly giving Junior some money because he’s there? Nope. Stop it.
- Leave A Financial Legacy To Your Family At All Costs. Here’s another tragic falsehood I see all the time. In one instance, two children who were wildly different in their lifestyles as adults received 50% of the parent’s estate. One daughter took those monies and continued to grow them. The other squandered it away in a matter of less than five years. This might be hard to acknowledge, but don’t share it if you know one of your kids will waste your lifetime of work. Likewise, if you feel your lifetime of work deserves to go elsewhere, don’t be afraid of taking those actions. Your legacy should go where it will be used, not abused.
- Debt Is Always Bad. Not at all true! BUT, most consumer debt isn’t “good,” either. Teach your kids to look at any purchase in terms of the declining value of the purchase versus the benefits of the purchase. A new laptop that assists them in getting a great education is a wise purchase. A $3,000 “gaming” computer might not be a wise purchase, especially when such a device is largely worthless in a matter of only a few years.
The same could be said of a new car – it offers safety, reliability, and so on for a new driver, but as it depreciates, the overall value drops. A truck purchased for work, on the other hand, allows the owner to create income, and thus, the “debt” incurred is offset by the income it helps to create.
- Financial Goals Aren’t Generational. This is another one I’ve heard over and over again. The truth is, the American Dream that our grandparents had is shockingly different than the one we’re following, and the same could be said of our kids. Fifty years ago, pensions were the norm, and you were likely to retire from a job you’d held your whole life. Today, many of us have realized that even the “go to college, start a career” path we lived – and suggested our kids should live – is rapidly losing touch with the reality of the workplace and the next generation’s life goals. The point is, what made our generation successful is likely NOT to make our kids’ successful, and we owe them the chance to not only educate themselves but to help educate us. Yes, we might be able to help them financially, but we also need to be able to offer wise counsel on what our experience tells us are likely outcomes. That might be from investments, careers, the prudence of when to buy their first home, or even if they should start a business as a twenty-something. Don’t be afraid to learn about these things together.
The key takeaway I want YOU to get from this is simple: talking about money and financials isn’t – and shouldn’t be – taboo. It’s only when we arm the next generation with the knowledge we’ve accrued that we can ensure they are not only good stewards of their own financials but also those of the generations to come.
We wish you a Happy Holiday.