I am often asked by wealthy parents and grandparents the best ways to raise competent, compassionate, productive young people. They ask how to avoid raising entitled and dependent kids, and how to teach them fine lessons on investing and being fiscally responsible. These are all worthy questions and goals. And years ago, I had answers that included lessons on finance, and curriculum designed to enhance their skills in these areas. My colleagues and I designed and delivered dozens of wonderful programs to inheritors. I have come to believe, however, that there is just one problem. It didn’t work.
What these young people need are not teams of experts delivering customized programs to them 2 or 3 times a year. What they need is hands on, real life, day in and day out experience. So while we were teaching them personal finance, their parents or family offices were paying all their bills, and producing their financial statements. The young people didn’t learn how to make the very real, hard choices on expenses, because they never ran short of funds. There was no need to delay gratification, or save toward a big purchase.
So I have come to believe that unless the parents and professionals don’t move aside and let the children gain skills through practical experiences, they won’t learn. They may well understand the complex financial terms we use, and the macro and micro finance issues at a theoretical level, but they won’t really know how it applies to them. They won’t know how to fly, if everyone around them flies for them, allowing them to be a passenger on the journey.
So parents out their, engage in money discussions with your kids beginning in early middle school. Set up an allowance program, and have them manage their expenses- more and more as they grow so that by the time they reach late high school they are buying their own clothes, and entertainment from their allowance. Don’t bail them out! If you do, you loose the teachable moment. Buy Joline Godfrey’s book- Raising Financially Fit Kids. Follow the suggestions in their that work for you. Teach them how to fly- then step aside.
As we usher in 2013 let me begin with expressing my gratitude to all the readers who have shared thoughts and feedback on the book with me. The most frequent comment I receive (besides the one that begins, “I have always dreamed of writing a book”) is that A Wealth of Possibilities is not just for the wealthy but for many. These readers share with me that they have bought copies for friends and family members who do not have great financial means, but who might find the ideas interesting and helpful for their families.
I am very curious about this and would love to hear more.
Happy New Year! – Ellen