Updated: 3/27/2012 12:36 PM ET|
Do you teach your kids to be poor?
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.
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The reason there are so many "poor" is because of Welfare and the choices made. Life is about personal choices and self reliance. Yes things happen but 90% of the time it is a choice we made that led us to that 90%. It is always our choice to move on or be a victim.
I was on welfare and state aid for many years. I was a single parent raising 3 babies. Yes I am a person of color and a male - not that the color should matter but it DID matter that I was a male. How dare I try to raise these children and take them away from their mother. She was a human trash bin, but that's another story. Anyway, suffice to say that I got a lot of grief and verbal abuse from the system because I was a male. I never liked the system because #1 I was not raised on it and; #2 I had always been told that it was "a self feeding monster created to re-enslave the black man". The deeper I got, the more they were right. Basically I had to take a pay cut to get out. I did get out. The GI bill paid for my college. I sweated for several years but all of my kids graduated too. They stand on their own and have never been laid off. I paid cash for my 2500 square home because I refused to be in debt. Cash is what is given for everything. I have no idea what my credit score is - don't care. The point of all of this is that the whole welfare thing pays about $14 an hour when you figure in daycare, food stamps, afterschool care, medical, rent and utility subs, etc. The self feeding monster gets its claws into you good. Its hard to release the safety net. But for the sake of your sole and those of your children YOU MUST. America MUST. This country will drown if we do not go back to looking in the mirror when we ask the question, who is responsible for where and who I AM.
After my youngest child was born, I told the welfare lady that I wanted to go back to school - I never graduated from high school - and make something of myself. She asked me why - I had until my child was 6 to make that decision. I graduated with my B.A. before her 6th birthday.
I don't know why people think $50,000 is a lot of money. That's what I earn and it barely keeps body and soul together. I don't lead an extravagant lifestyle - I learned that lesson the hard way.. I rarely use my credit cards - I also learned that lesson the hard way.
My children are doing well. My son joined the military so that he could earn his educationally benefits and has ended up making a career of it but plans to attend college when he retires in 5 years. My daughter had to learn about credit the hard way and is just finishing up her degree at 34 years old.
You can break the cycle but you have to want to do it. I applaud Wolfman 63 - you too got out and up! The kids stuck in the "rut" need to be shown a different way to think.
after finding myself divorced and alone at age 40, i adopted the philosophy of never getting myself in any financial situation deeper than what could be paid for on minimum wages - anyone can find a minimum wage job of some kind if they look hard enough-[ the key word here is a JOB not a position]-
better paying jobs eventually came along but i stuck with my plan of living as if i was only earning minimum wages and saved all the rest - this mentality resulted in saving enough to pay off a 30 year mortgage on a fixer upper house in less than 10 years-
now i am debt free, own my own home and have the flexibility to fix up the house a little at a time and pay cash as i go-
regardless of how much you earn, live as if you can only pay for what you would earn on minimum wages and save the rest you will come out ahead in the long run- all that is required is discipline and being goal oriented-
ditch worrying about what the neighbors or the jones' think of your lifestyle- in the end , while they are being foreclosed on, bankrupt and standing in line for food stamps ,you can be free and clear-
after their bubble bursts the only problem is keeping the losers from attempting to move in on you as if you owe them a place to stay free of charge- -
I started early explaining to my kids that those with more education earn more. We all work for money, and depending on how we spend it, we all have enough. It all is in the priorities and what is important to you. Do you need to spend hundreds of dollars on tattoos? Then don't complain when you can't afford your bills. Myth number one....Rich people do not blow their money. They make careful decisions and prioritize what they spend. For example, I love to boat. For me it is a priority and no, it is not cheap. Therefore, I chose a cheaper home and a cheaper car so I could spend more on my hobby. It's about making the right choices and living within your means. Can't do that? Get more education so you earn more!
Our families were not well off, both sets of parents worked outside the home. Our two eldest sons didn't finish college but have jobs with good earnings and security. Our two younger sons work retail and are attending college. College is important, but so is hard work. You make your own destiny. As in sports, luck comes from preparation (knowledge and planning).
This article should be required reading for everyone. Having grown up in a lower middle class neighborhood, I can attest to the "poor mentality" that prevailed and still does. Thank God my parents instilled the American dream in us, my siblings and I have all grown up and became successful the old fashioned way: work hard, save, invest, and live within your means.
I always rail against those who think the system is rigged or the stock market is legalized gambling or other such loser mentality. Only cowards think luck or ancestry leads to success.
Where I live, it is a rather blue collar environment that discourages young people from going to college, especially the girls. People are very Archie-Bunker like and racist, also. Girls are encouraged to marry by age 19-20 and have as many children as possible, as having vast numbers of kids is a status symbol of some kind in this community -- as in, 'I have 8 kids and another on the way!' One man I know is one of 7 kids, and says he wants to 'beat his dad's record.' The men have to work 2-3 jobs to feed all these urchins that keep popping out. Their wives are constantly going to the local food pantry, and families are always getting "assistance." This town is like in a time warp, no college, no real careers, just work in blue collar jobs, like janitorial or landscaping or roofing, the women work as waitresses if their husbands "let them work." They get laid off a lot, and they are dirt poor. And the sad thing is, they look down on people who have an education and a different attitude about life, because they react to you as if you are "strange" for reading books or watching public television, thinking for yourself, having a career, traveling to Europe, and doing something with your life rather than marching off the cliff with the rest of the mindless lemmings...
I see it's all tied together, the poverty and the attitude that they must follow the script that generations long ago wrote for them. I see it, but they don't. They don't see how they trap themselves. They have a "God will provide" attitude, and don't plan for emergencies and don't save and don't plan for the future. They have no savings and no retirement funds. They get health problems and don't see a doctor as they cannot afford a co-pay and let themselves just get worse. One person I know would not see a doctor about an eye problem as she could not afford a co-pay and eventually became blind and now cannot drive or work.
Not everyone where I live is like that, but a lot of them are: it's like, go to high school, get married, get job (yes, in that order, as they get married and find a job after the wedding!), have vast numbers of kids, then brainwash your own kids to do the same, and don't let them dare to think any differently from other people... it's a cycle that repeats itself.
I'm in Massachusetts but I feel like I'm in some backward part of the country, because that's the attitude around here. And it's sad. I often give them grocery store gift cards, enough to get them through the next few days, until a check comes for them or the food pantry opens up. But what they really need is an education and real world skills. I offered to teach basic computer skills to one person so she could get a better job, but she did not want to learn, and said, "I won't get near a computer!" She was getting minimum wage, and barely getting by. They seem to want to just follow along, not learn anything, and do like everyone else does, afraid to think outside the community's small little box.
They trap themselves in poverty this way, it's sad, but that's what I see.
Suggestion: Don't do that.
wac72 - your last paragraph. We taxpayers often do ultimately foot the bill. Social Security is the prime example. Benefits are already partially taxed for higher income recipients, and will likely have to move to some type of means testing.
In effect, my SS will be reduced and taxed to provide benefits for others who chose to drive new autos, watch calbe TV, eat out, have boats, ... other toys while I passed on those types of purchases and saved for retirement instead. I have known many families that based on their occupations could only be making about half of what my family makes, but appear to live a more expensive lifestyle. And I could only roll my eyes when these same people would tell my how lucky I was to be able to afford to send my children to private schools. Occassionally, I would come out and tell them that they were driving their childrens school tuition (not a popular comment).
My parents were hard working blue collar people and lived like it. I've seen too many of them now days try to live like "millionaires" (whatever that means) on what may be a solid, but still not wealthy income.
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