By: Jason Print, CFP®
Co-President & CEO
On our family summer vacation, we laid down some money rules for the kids. Jamie and I decided to put an end to the days of our children asking if they could have a trinket or a toy at every store we visited during a trip. Instead, they would have their own money. We let them know a few months in advance how much they would get for doing their household chores (dishes, dog walking, laundry, etc.). If they wanted to earn something extra, we would provide opportunities – for example, let them wash the car or mow the lawn.
They were allowed to take with them any money they had managed to save, but there would be no requests. It was up to them to decide what toys or keychains they wanted more. From a father’s perspective, this was quite entertaining, particularly when they asked questions like, “What if it turns out that the store we visit tomorrow has a shirt I like better than this one?” It was great watching them debate with themselves and learn to make decisions. Hopefully, they have learned lessons that will serve them throughout their lives.
There is always an opportunity cost and no shortage of options for spending your money. It all comes down to values and what you consider important with regard to money. In this aspect, my two children are quite different. Sydney, my 12-year-old daughter, blew all of her money on clothes, while Joseph, my 10-year-old son, spent all of his on a pocket knife. It is admittedly a very cool gadget, and he does treasure it. If the purpose of money is to allow one to experience joy, his purchase certainly fits the bill.
During the trip, I realized that my kids value different things. One urge I tried hard to resist was judging any of their purchases.
I couldn’t tell the difference between an expensive and a cheap pair of yoga pants, but that’s just me. I tried to remind myself these are their lives and their choices, and I don’t need to judge. I may view a purchase through the lens of practicality, but they don’t have to adopt my perspective.
After a great vacation, I thought about a wonderful article Morgan Housel wrote a few years ago. In this piece, he listed 10 money rules for his newborn child. Here’s a recap for those who are new parents or grandparents.
1. You might think you want an expensive car, a fancy watch, and a huge house. You really don’t. You want the respect and admiration you think that stuff will bring. However, it almost never does, particularly from the people you want to respect and admire you.
2. It’s normal to assume that all financial success and failure is earned. This is mostly true, but only up to a point. Our lives are a reflection of the experiences we’ve had and the people we’ve met. Some of us are born into flourishing economies, while others come into this world during great depressions.
3. This may sound harsh, but I hope you’re poor at some point. It’s difficult to learn the value of money without feeling the burden of its scarcity. It teaches you the difference between necessary and desirable. Learn to be poor with dignity, and you’ll handle the inevitable ups and downs of financial life with ease.
4. The goalposts always move. Most of us think, “Once I’ve saved/earned X amount of money, everything will be great.” When we get there, we move the goalposts and get sucked into the cycle again.
5. Don’t stay in a job you hate. Just because you made a career choice at 18 doesn’t mean you have to stick with it forever. Most people don’t figure out what they want to do with their life until much later.
6. Change your mind when you need to. Confidence improves faster than ability. Learn the skill of changing your mind, discarding old beliefs, and replacing them with new truths. It’s hard but necessary.
7. The best thing money buys is control over your time. It gives you options and frees you from relying on someone else’s priorities.
8. The road to financial regret is paved with debt. It’s amazing what percentage of financial problems is caused by borrowing. Debit is a claim on your future, which you’ll always miss, in order to gain something today, which you’ll quickly get used to. Some debt (such as a mortgage) is OK, but be careful.
9. Your savings rate has little to do with how much you earn and a lot to do with how much you spend. There are many high earners who live paycheck to paycheck and many people who make a modest living but save 10% or 20% of their income. How much you earn doesn’t determine how much you have.
10. Don’t listen to me if you disagree with what I’ve written. No two people are alike. The world you grow up in will have values and opportunities different from those of the world I was raised in. More importantly, you’ll learn best when you disagree with someone and are then forced to learn it yourself.
