I recently read and reviewed Andrew Hallam’s book, The Millionaire Teacher. As I read the book, there was one message that really hit me about the relationship between parents and children and the issue of helping kids financially.
I see so many parents today who feel it’s their responsibility to pay for their kids education, provide the down payment on their first home and even pay for their multiple weddings. Maybe that’s the reason why so many boomers are heading to retirement with debt and stressed about the fact they have not saved enough for retirement. Worse yet, maybe that’s also the reason why many have labeled this generation of young adults the generation that feels entitled and lacks the work ethic of previous generations.
Here’s a few of messages from Hallam’s book:
- Wealth doesn’t last more than three generations. There’s a generation that builds wealth, a generation that maintains it and a generation that squanders it.
- It’s natural for parents to want to help their children. But the Chinese have known for thousands of years what happened to money that is given to youngsters who had no hand in building that wealth. It gets squandered.
- Adults who received “Helpful” financial gifts from their parents typically end up with lower levels of wealth than people in the same income bracket who don’t receive financial assistance.
- It’s a tough concept for parents to grasp. They feel they can give their kids a strong financial head start by giving them money. Statistically speaking, easy money is wasted money.
- Those that receive financial help were more likely to have less wealth in the future than those that never received financial help from their parents. Receiving financial handouts hinders a person’s ability to create wealth.
- Giving money promotes weakness and dependence. Teaching money lessons and encouraging the struggle promotes strength, independence and pride.
Parents have a big responsibility
One of the problems I see is there is no formal venues for financial education. It’s not taught properly in schools (if at all) and it’s not common in the workplace. Most financial education comes from the financial industry, which can be highly product biased and self serving.
Most financial education is informal and as a result happens at home. But how many families don’t talk about money? How many parents are lousy with money and are actually bad examples for their kids? How many parents may be good with money but don’t know how to teach it to their kids.
I don’t have the perfect cookie cutter solution. I wish I did because I could make a lot of money with it. I know it’s a topic that is very important to me with four young boys. Obviously I want to help my kids financially where needed but I think financial education is key. I teach money to strangers so I better teach my kids so they can have a financial advantage over others. What I do know is that it’s important to teach kids about money but also teach them about work ethic.
What do you think about giving money to kids? Good or bad? Any circumstances where it's good and other where it's bad?