8/20/2012 2:15 PM ET|
Do you teach your kids to be poor?
Sometimes parents pass on to their children poor advice about handling money. Here are some messages that won't be helpful when those offspring strike out on their own.
Lots of people complain to me that their parents didn't teach them about money. Maybe they're the lucky ones.
Sometimes the lessons parents teach about finance are just plain wrong. It can take years for their kids to recover, if they ever do.
Kelvin Leeds of Seal Beach, Calif., said his parents had told him that rich people were lucky. "Fortunately," he wrote on my Facebook page, "I learned that it mostly involves hard work."
Colleen Sluss Gorman of Champaign, Ill., absorbed an even worse message.
"Growing up, my folks were poor," Gorman wrote. "I learned that all rich people are evil, all corporations are rich, people who are 'well off' (earning more than around $50,000) were overpaid and lazy."
If you're taught that wealth is the result of luck or misdeeds, what would motivate you to handle money responsibly, grow your income and increase your net worth? Gorman eventually realized the shortcomings of her parents' worldview, but it still affects her.
"I occasionally feel guilty about the amount of money I and my husband make and the amount we have in savings," she wrote.
If you're a parent, you should think twice about passing on these messages. If you received them as a kid, now is the time to shake yourself free from unhelpful lessons, including:
'The universe will provide'
In one sense, it's true: A lot of money will flow into your hands during your lifetime. What counts is what you do with it.
Allison Burnell of Reston, Va., grew up in a family of six and wrote that her parents had "never planned ahead for anything (or maybe they couldn't afford to, raising six kids)."
"Their attitude was more or less 'God will provide' or that things would take care of themselves," Burnell wrote. "I grew up never learning to plan ahead or save for things as a result."
Often, failure to plan can mean ever-deepening debt, as the grasshopper (of the ant-and-grasshopper fable) reaches for a credit card to handle "unexpected" expenses.
"My mother is of the belief that it's just money (and) not a big deal," another reader wrote. "She figures there will always be more coming in, and is in more debt than I ever care to encounter."
Another reader who has parents with the same attitude despairs that they'll ever change the behavior that causes the need for "another windfall . . . (to) save your financial butt."
"What??? Use the financial windfall to save or get ahead??? What's that about?" she wrote.
'You can't trust anybody'
You have to wonder about someone who thinks no one else is trustworthy. Is he not trustworthy himself?
But the reality is that money can get complicated, and you need to build some reliable resources to help you answer questions about taxes, insurance, investing and estate planning, among other topics.
If you never learn to distinguish between honorable, upright people and their opposites, you're likely to get burned when you try to get help. If you avoid others' counsel entirely, you could make some costly mistakes.
Here's just one example: A reader once wrote to rail about the estate tax and how the after-death levies had cost his family its business. After more correspondence, it turned out his father had hated lawyers. Had he consulted one, the dad could have taken advantage of estate-planning opportunities before he died that could have preserved the company he founded. His family paid the price for his paranoia.
'You have to buy a house'
I hear from a surprising number of 20-somethings that their parents are pressuring them to buy homes -- even now, after millions of foreclosures have made it quite clear that not everyone should be a homeowner.
"My dad still to this day urges me to buy a house," wrote one of the recipients of this pressure, who describes herself as a single 20-something living in New Jersey, which has some of the highest property taxes in the nation, on an annual salary of under $50,000. "Meanwhile, what it costs me to rent my apartment (is one-third the cost) to afford a house here."
Buying rather than renting makes sense in most cities, according to Trulia, a real-estate website. But that's only if the buyer plans to stay put for several years, and many people in their 20s aren't ready to settle down.
In high-cost areas, buying may never make financial sense compared with renting. Before you give in to the pressure to buy, run some numbers through MSN Money's buy-versus-rent calculator. And read "Are you crazy to buy a home now?"
'You don't need a college education'
This may have been true in the 1970s, when someone with a college degree made only 25% more than someone with just a high school education.
Today, though, that gap has widened to 84%, according to a 2011 study by the Georgetown University's Center on Education and the Workplace. People without college degrees are fast losing ground as manufacturing and other well-paying jobs that don't require degrees disappear or get outsourced overseas. A separate Georgetown study estimated that by 2018, 63% of U.S. jobs will require some kind of postsecondary education or training. Currently, only 40% of high school graduates get a degree after high school.
The current horrible employment situation, with college graduates waiting tables or boomeranging back home, has convinced some that investing in a college education isn't worth it. But the unemployment rate for college graduates still is about half that for people with high school degrees. Even those having a rough time getting launched today likely will make far more over their working lifetimes than those who skipped college, as long as they picked the right majors and didn't overdose on debt. For more, read "Should your kid skip college?"
'Avoid debt at all costs'
If this attitude keeps you out of credit card debt, then great. If it keeps you out of college, then not so much.
If you want to build wealth, you need to understand the difference between good debt, which can help you get ahead, and bad debt, which erodes your financial security. A moderate amount of student loan or mortgage debt can be an investment in your future.
Avoiding good debt or paying it off too fast, instead of saving for retirement or other goals, can leave you poorer in the long run. Read "The 5 worst pieces of financial advice" for more.
'Hoard your money'
Hoarding can take many forms. Readers wrote of parents who refused to give to charity or pay for a child's needed dental work. Other parents were overly frugal, often wasting money because they bought on the cheap rather than investing in quality. One reader called it a "poverty mentality" that was the opposite of a balanced, healthy approach toward money.
"Neither one of my parents came from much, so when they got older and both got good jobs with large companies, my father turned into an extreme saver," wrote Lauren Lang of Lakewood, Colo. "Every penny that didn't go towards paying bills went towards his retirement account to the point where we would walk around with holes in our slippers, etc. . . . I believe in saving, but I also believe in living. There has to be a balance, and that's what my father lacked."
'Give until it hurts'
This attitude is at the opposite end of the spectrum from the hoarding mentality but is just as unbalanced. Parents with this attitude give away money even as they deny their families necessities or sink further into debt. Sometimes the recipients are charities, while other times the beneficiaries are family members who can't or won't take care of themselves.
A 2011 poll indicated that 59% of parents were providing financial support to adult children who weren't in college. Of the parents offering support, 26% had taken on additional debt, and 7% had delayed retirement.
We parents don't want to see our kids suffer. But our most important job is to make ourselves obsolete, raising financially independent offspring rather than adults still entwined in our financial apron strings. When we sacrifice our retirements or go into debt to support grown kids, we're teaching them exactly the wrong financial lessons.
Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.
VIDEO ON MSN MONEY
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
RECENT ARTICLES ON FAMILY & MONEY
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'