The best (and lasting) teaching experience for my daughter came unscripted. In 2006, she asked "Mom, how come we don't have a big house like_____?" I explained how 1) there was no need (we are a family of three) 2) we were comfortable and had all we needed and 3) we lived within our means (this took just a minute or two to explain). Then came the crash of 2008-09, and I returned to her question when a few in our neighborhood (who were clearly living beyond their means) lost their homes to foreclosure. I pointed out to my daughter (without enmity and with compassion) that this is what can happen when people live beyond their means. Yes, I did happen to know two of these people and the details of how they had taken out home equity loans to travel, put in the swimming pool, and add that extra 1000 square feet to their homes.
My daughter is now 21 and shops with a budget in mind, loves the hunt for a bargain, and makes some of her own clothes. Is she perfect? Absolutely not. But when there is temptation, she usually sends me a text or calls me to ask if the item/experience is worth the $$.
Yes, I am proud.
My daughter is now 21 and shops with a budget in mind, loves the hunt for a bargain, and makes some of her own clothes. Is she perfect? Absolutely not. But when there is temptation, she usually sends me a text or calls me to ask if the item/experience is worth the $$.
Yes, I am proud.
4
Your economic state growing up is a big influence on how you'll live as an adult. I grew up poor in Brooklyn until I was 13. My father was in and out of the mental hospital a lot. We lived on Relief which wasn't very generous in the 1950s. I hustled delivering groceries for tips. On Fridays and Saturdays I delivered chickens and eggs.
After my father stabilized things were somewhat better. He had a trade and was good at it. We moved to Florida in 1964 and did somewhat better but still we were broke.
Too many children. By the time I was 13 I had 6 siblings. Another came along when I was 16. I worked at a Royal Castle at 16 claiming I was 18. School became secondary and I regret that today. After trying tool and die work and sheet metal I talked myself into Southern Bell. A great employer. I routinely worked 13 days with one day off 12 hours a day. Miami was growing. Moved to NYC to work at the WTC project, 4 years in the Navy. Marriage. My wife was a Physical Therapist with small debt. Waited 5 years to have a child. Moved South.
I started a business after I was laid off in 1985 which sustained us for 30 years. I bought property. A condo for my son while in college that rents paid for. No big profit but no expenditure either. Rural land that quintupled in price. A beach house that quadrupled.
We paid cash for my son's education and gave him a $15K CD for graduation. The better gift was no school debt for him.
Work hard, live simply. No letter. Just example.
After my father stabilized things were somewhat better. He had a trade and was good at it. We moved to Florida in 1964 and did somewhat better but still we were broke.
Too many children. By the time I was 13 I had 6 siblings. Another came along when I was 16. I worked at a Royal Castle at 16 claiming I was 18. School became secondary and I regret that today. After trying tool and die work and sheet metal I talked myself into Southern Bell. A great employer. I routinely worked 13 days with one day off 12 hours a day. Miami was growing. Moved to NYC to work at the WTC project, 4 years in the Navy. Marriage. My wife was a Physical Therapist with small debt. Waited 5 years to have a child. Moved South.
I started a business after I was laid off in 1985 which sustained us for 30 years. I bought property. A condo for my son while in college that rents paid for. No big profit but no expenditure either. Rural land that quintupled in price. A beach house that quadrupled.
We paid cash for my son's education and gave him a $15K CD for graduation. The better gift was no school debt for him.
Work hard, live simply. No letter. Just example.
4
Along with the letter, give them a copy of A Random Walk Down Walk Street, by far the best single book on investing (and one I'm sure financial planners will not provide because it disintermediates their craft and that of their usually underperforming fund managers). I wish I had read it in my 20's, It still helped me out tremendously in my 50's. Which reminds me, as I always stress to my college kids, the most valuable asset you have is TIME.
2
I'm a baby boomer. I'll be 69 in September. My wife and I have a net worth greater than $4.5 million. It didn't fall into our lap. We worked for it. Our children will never see the benefits of our success. As millennials they can't understand our values, our needs and our desire to live comfortably in retirement. They have rejected our advice on investment, financial choices in life and how to live modestly, successfully and not blow it all. They deeply resent that we do not share our wealth now. Our parents too, earned their way through life. They remembered the Great Depression, World War II and the sacrifices that they and their parents made in order to succeed and be able to send us to college. We too remember how they struggled and worked. Our kids are all successful. One is a lawyer, another a college professor and elementary school principal. Others have master's degrees in communications, speech pathology and sociology. They all make a good living. Regardless of their own success they see our wealth as an entitlement. An inheritance that is due to them. While the kids do all right they'll never achieve what we have.
We're spending their inheritance. We travel around the world, buy whatever we like ( a new 2016 Mustang GT convertible), collectibles, clothes, and we also have our hobbies and fun stuff.
Letter to our kids: "Work hard. Save a lot. Think before spending. Prepare for retirement. Be healthy. Be generous to others less fortunate." Love, Mom and Dad.
We're spending their inheritance. We travel around the world, buy whatever we like ( a new 2016 Mustang GT convertible), collectibles, clothes, and we also have our hobbies and fun stuff.
Letter to our kids: "Work hard. Save a lot. Think before spending. Prepare for retirement. Be healthy. Be generous to others less fortunate." Love, Mom and Dad.
8
And be fortunate to live during a period of economic prosperity.
4
How very sad. You don't owe them anything financially but I'm afraid you have set yourselves up for a lonely retirement with your prideful and censorious attitude. You may be rich in cash, but you seem very poor in understanding.
5
My parents were big on us learning the value of a dollar, and one of the things they did for their children was to open an individual savings account for each of us when we were 5. Most gift money, no matter how small, that we received from anyone went into that account. The amount saved was tiny, but looking at the passbook and the balance growing taught us about saving and earning interest. When I started working as a teen, most of my earnings went into that same savings account. I ended up with a tidy amount to help pay for some of my college expenses, do a budget trip to Europe and still have some money left to start off with after college graduation.
As a young adult living hand-to-mouth in early post-college jobs, I kept up the habit of putting any "extra" money beyond my paycheck in my savings account -- tax refunds, small rebate checks, gift money. That formed my small emergency fund and later, when I earned more, I saved more.
Learning from a very young age that saving even a small amount is important was a lesson that continues to pay off. For example, saving a relatively modest amount for retirement when you are young is much better than saving much more later in life without the time to grow your funds.
As a young adult living hand-to-mouth in early post-college jobs, I kept up the habit of putting any "extra" money beyond my paycheck in my savings account -- tax refunds, small rebate checks, gift money. That formed my small emergency fund and later, when I earned more, I saved more.
Learning from a very young age that saving even a small amount is important was a lesson that continues to pay off. For example, saving a relatively modest amount for retirement when you are young is much better than saving much more later in life without the time to grow your funds.
3
It's impossible to recreate the experience you describe. I'd love to start savings accounts for my grandchildren, but there's no such thing as a passbook, and savings in money market accounts grow hardly at all. It's difficult, in other words, to find the vehicle which will teach the value of savings the way you (and I) learned.
5
I'd recommend a mutual fund at Vanguard and track it in Quicken where they can see the entries 'real time', etc. They get it and also say something like 'money isn't this plastic card that I swipe' when you're at the store...
1
Key points for such a letter:
Its next to impossible to select specific stocks that will win. The average lifespan of an S&P company dropped from 67 years in the 1920s to 15 years today.
Your most valuable asset is your career, the income stream it provides is worth so much. Invest in ensuring that income stream is not tied to a company but tied to your skills.
Debt is for dummies, unless it is to purchase an asset and you have the means to pay down the debt. Corollary - credit card debt is for the worst of the dummies.
Management fees for indexes or as a percent of account size are hugely costly. Pay yourself that fee by learning to invest in a low cost index fund. Then give yourself a raise by learning to diversify and put your investments across several classes of index funds.
Its next to impossible to select specific stocks that will win. The average lifespan of an S&P company dropped from 67 years in the 1920s to 15 years today.
Your most valuable asset is your career, the income stream it provides is worth so much. Invest in ensuring that income stream is not tied to a company but tied to your skills.
Debt is for dummies, unless it is to purchase an asset and you have the means to pay down the debt. Corollary - credit card debt is for the worst of the dummies.
Management fees for indexes or as a percent of account size are hugely costly. Pay yourself that fee by learning to invest in a low cost index fund. Then give yourself a raise by learning to diversify and put your investments across several classes of index funds.
7
Good letter. However, I am skeptical about a 36-year old writing a financial advice book. As the letter advises, you want to seek your counsel from someone who has had at least one great financial success and one great failure.
5
I think the best advice I gave my sons was given inadvertently. Both have told me they were listening when I was having a conversation with colleagues. My idea of working with anyone is to work with them not for them. With, in the sense that I was fully engaged in the process but not for because then I would have no input in the direction. Admittedly I was doing discovery research for 2 of the biggest companies on earth so I was a guide and follower at the same time but primarily a guide - to money because as a research scientist I was responsible for "making new stuff" which management could patent and sell which I was lucky enough to do so well.
Both my sons have taken heed and now have done me one better. They both own their on businesses.
One can never can tell what idle comments can have a profound influence on our children's lives - when they are listening...
Both my sons have taken heed and now have done me one better. They both own their on businesses.
One can never can tell what idle comments can have a profound influence on our children's lives - when they are listening...
3
The cardinal rule we taught our children: live within your means.
14
What a great Idea! My two sons are polar opposites -- #1 got a good job after college (engineer) and immediately bought a super-expensive mountain bike, and a new (!) car, even with student loans needing repayment; #2 is still bouncing around from job to job, but has been funding an IRA since the tender age of 25, has learned to fix his own car, tracks his income and expenses in Quicken. Occasionally they ask me for advice - but yeah, I should offer it up, unsolicited. Despite being a single mom most of their lives without support from their dad, I managed to end up pretty well financially through the benefit of my good financial habits. Because I am a CPA, I have a window into lots of people's finances, and it is positively shocking the people with substantial incomes (grown adults, not students with big loan debt) who save absolutely nothing!
9
Not just a letter but keys as well to storage units, bank deposit boxes, mailbox, car keys - you get the point.
2
I just spent the last year taking care of my mother so she could age in place. Once or twice a week, around 3 pm, she would drag over her stool and a pile of photo albums and scrapbooks from different phases of her life. She told me stories about her boyfriends and stories about my father, stories about my grandparents and great grandparents. I saw a picture of a very, very unhappy six year old girl sitting on an ostrich in California. No one could convince my mother that the ostrich was not going to fly them up into the sky and be gone forever. We talked about the family successes and follies of which I knew little. She explained why my father became so angry when I dropped out of college and much later when I started my own business, as he had done the same, starting and failing several times over. We talked about her life as a working mother, following my father during his erratic job-hopping phase. She also discussed their ability to earn and save about 3 million dollars each while working jobs that paid little more than the minimum. They accumulated real estate assets and invested in the stock market and purchased bonds. There was a philosophy behind their investing. In retrospect, it would have been so much better to have it all written down. In the end, most want to be remembered. Remembered in a way that fills in the gaps between the dates of birth and death written in the family bible.
5
My daughter is constantly wanting to record her older relatives. Maybe better -- or best -- to hear the stories and record/write them down. Thanks for sharing this.
4
Recording and playback technology changes so often that written documents are often the only thing that you can count on to last through generations.
4
I wish my wife's and my mothers were like yours. For years we have been dealing with Alzheimers, a very expensive and tie consuming disease.
Our Mothers didn't work much. Families were very large and what jobs they got didn't pay well. Our Fathers had made decent money but never saved or invested. My Father in Law took the whole 30 years to pay off his mortgage of about $30 a month in 1979. Our parents were not good with money having lots of consumer debt. I tired of taking credit cards away from my mother. It's pretty bad when 10 year olds know to lie when someone calls and ask for your parent.
They were everything I swore I would never be. I never was and at 65 and 67 we are happy to see my son living an easier life but also saving and not buying garbage he and his family don't need. I'm a little surprised because he was an only child and didn't lack for much but there were times when he was forced to discipline himself about money. He does somethings I wouldn't do but he's still disciplined and has a wife who is also a hard worker and a saver. She in fact was better than him at it.
When he moved to Northern VA I advised him to purchase a Condo. Anywhere else that might be a mistake but not in the DC area. He didn't and rented the same run down dump condo for 12 years. His future wife did paying $130K for it and selling it 12 years later for $390K. It was exactly the same model he rented.
I think she's the one with more discipline.
Our Mothers didn't work much. Families were very large and what jobs they got didn't pay well. Our Fathers had made decent money but never saved or invested. My Father in Law took the whole 30 years to pay off his mortgage of about $30 a month in 1979. Our parents were not good with money having lots of consumer debt. I tired of taking credit cards away from my mother. It's pretty bad when 10 year olds know to lie when someone calls and ask for your parent.
They were everything I swore I would never be. I never was and at 65 and 67 we are happy to see my son living an easier life but also saving and not buying garbage he and his family don't need. I'm a little surprised because he was an only child and didn't lack for much but there were times when he was forced to discipline himself about money. He does somethings I wouldn't do but he's still disciplined and has a wife who is also a hard worker and a saver. She in fact was better than him at it.
When he moved to Northern VA I advised him to purchase a Condo. Anywhere else that might be a mistake but not in the DC area. He didn't and rented the same run down dump condo for 12 years. His future wife did paying $130K for it and selling it 12 years later for $390K. It was exactly the same model he rented.
I think she's the one with more discipline.
1
This is a delicate conversation, because children and teens are bombarded nearly every waking second with messages to buy things. TV is populated with affluent characters who don't just have homes, cars and clothes but very, very nice homes, cars and clothes. Young people, as I did when I was a teenager, can internalize the message that luxury, affluence and abundance are normal, and that their own parents' efforts to be smart with money--as my mother did, clipping coupons every Sunday, tracking the supermarket specials, documenting every expenditure, insisting that we buy affordable clothes from lower priced outlets rather than the designer and logo items our classmates wore--were not. My mother's exhortations for us to be smarter, to see through the marketing ploys, the superficial consumption and the peer pressure, fell on my and my siblings' largely closed and resentful young ears. Our middle-class suburban peers seemed to have everything--luxury car in the driveway, tennis lessons, ski trips--and we wanted to fit in. Well, my mother, a single parent, paid off her mortgage decades ago. She has enough saved to stop working, but she continues to work because she likes it. Popular culture does not extoll or teach the values of patience, sacrifice, delayed gratification. These values aren't sexy. But these values make people rich.
16
If you can find a copy of "The Millionaire Next Door".
It's an old read but the statistics are interesting. Most popular vehicle? A Ford F150 pick up. Most common credit card? SEARS.
You couldn't tell how much wealth they had by appearance.
I have though seen many people with the appearance of a millionaire only to see them declare bankruptcy in hard times when all the leased stuff gets taken back. I saw it a lot in 1987 when business people leased everything and took huge salaries. When business dropped off they didn't have the salary or the money to pay the office equipment leases. They even lost their over-sized homes.
It's an old read but the statistics are interesting. Most popular vehicle? A Ford F150 pick up. Most common credit card? SEARS.
You couldn't tell how much wealth they had by appearance.
I have though seen many people with the appearance of a millionaire only to see them declare bankruptcy in hard times when all the leased stuff gets taken back. I saw it a lot in 1987 when business people leased everything and took huge salaries. When business dropped off they didn't have the salary or the money to pay the office equipment leases. They even lost their over-sized homes.
1
Unfortunately for all those Wall Street types who drool after 5+% growth each year, if every young person did what was in their best interests (no debt, stop buying things for image, save save save, etc), 90% would have to quit and the economic world would be much more boring.
6
Introduce them to the concept of need vs. want and discuss the implications.
30
Don't buy a timeshare. I can't believe in 2016, with all the information that is readily available to anyone, that there still exists people who fall for these scams.
17
Do not run up debt. Pay off your credit cards every month. Resist the idea that you have to have the newest, fastest, shiniest, most expensive toy to impress your peer group. To hell with them; you probably won't even know those people in 20 years.
Save a little each month -- you can do this by contributing to a 401k before you even see your paycheck.
There. Conversation over.
Save a little each month -- you can do this by contributing to a 401k before you even see your paycheck.
There. Conversation over.
32
No, conversation oversimplified. The real mark of how one handles finances is how one adjusts in the face of adversity. My doctoral student wife developed a number of conditions that have rendered her unable to work (pain management is a 24-hour-a-day job) and, 51 surgeries later, we've never had the "newest, fastest, shiniest" of anything. We rent an old apartment and drive old cars. I work full time and three part-time jobs. The money has gone to medical bills, the two kids' education and a little each month toward a retirement account and bills that pop up -- hospitals and doctors want their money, too--and must be paid now.
The best advice is to walk in someone else's financial shoes.
The best advice is to walk in someone else's financial shoes.
6
It is possible to use a credit card wisely. Paying it off at the end of the month is the #1 advice. I use ours to pay all the bills I would be writing checks for plus I get cash back. We even bought two cars on it, paid it off and got lots of cash back at the COSTCO.
Maybe the best advice would be to move to a country with universal health care for everyone. There are quite a few; look it up.
The money people waste on new cars and credit cards, should go to paying off the house in ten years. Mtg-free home is job one in smart money living. It's a do-able financial goal. Then, a retirement fund should be the second goal. The peace of mind of mtg-free living!
6
@Phil Dolan. Mortgage interest rates are very low. Better to lock in to these historically very low rates for a 30 year fixed mortgage and instead start that retirement fund you're referring to concurrently and not as "the second goal" that you are referring to.
20
Dear son:
I am sorry not to pay for college. I had the funds saved, but I wasted them on that divorce and custody battle. You see, I deserved to have the kids. Isn't it obvious? Oh, and you can ask your father to fill out that financial aid form. Oh, my tax return? That's private! I'm not going to provide it to you! Where did you get that idea? Your grandfather's fund? Oh, I used that to provide for you-that attorney that let me have you, yes, put to good use.
I am sorry not to pay for college. I had the funds saved, but I wasted them on that divorce and custody battle. You see, I deserved to have the kids. Isn't it obvious? Oh, and you can ask your father to fill out that financial aid form. Oh, my tax return? That's private! I'm not going to provide it to you! Where did you get that idea? Your grandfather's fund? Oh, I used that to provide for you-that attorney that let me have you, yes, put to good use.
3
Our high schools offer algebra, geometry, trigonometry and even calculus (why?) but investing, the relationship of bond price vs. yield, market trends etc. no way. I hate to sound like a conspiracy theorist but I get the feeling that "they" don't want folks to be doing anything with their money except spending more than all of it, making the financially illiterate slaves to the machine of the corporate class.
Yes I agree read "The Millionaire Next Door" , stop spending and learn about many ways to grow your money without falling prey to the blood thirsty baknkers.
Yes I agree read "The Millionaire Next Door" , stop spending and learn about many ways to grow your money without falling prey to the blood thirsty baknkers.
32
It's more likely that your average high school teacher knows nothing about finance even if they can teach math. We are stuck in a generational cycle of ignorance when it comes to personal finance. I'm always surprised when super smart ppl I know who work at fancy places have never even heard of vanguard or even the concept of index funds. Some of these people even carry credit card balances. You really have to want to know, as it seems like personal finance isn't something you can just absorb from the larger culture.
6
I agree with you on this. I think algebra and geometry are helpful generally in life, even just as a mathematical understanding, but I remember absolutely nothing from calculus, and I imagine it's the same for most. On the other hand, a class in personal finance would have been hugely helpful for me. I don't think it's a conspiracy of any sort, but it's a sort of tradition of schooling based on an earlier time. It's tough to change these traditions once they're in place, but pushing for a required class in markets, finance etc., all aimed at one's personal decisions, in high school (and then another one in college) would be a positive development, I think.
3
That mutual fund with the 1.0% annual fee seems like a good thing until we approach retirement, when we're told a conservative plan is to spend only 3% of our assets each year. Suddenly, that small annual fee represents up to 33% of our annual spending (if all our assets were in such funds, and we had no other source of income).
Low fee index funds start to look much more appealing. But there's no reason to wait until retirement to use them.
Low fee index funds start to look much more appealing. But there's no reason to wait until retirement to use them.
26
The one item I would include in a financial letter to my children would be to open every bill as it comes in. It's better to know the truth about your finances as soon as possible. No big surprises!
17
As soon as our three daughters wanted to buy shoes and clothes that we didn't want to pay for, we gave them a generous allowance and said, "Here's your allowance. Out of this you are going to buy your own clothes [we made a calculation based on keeping track of our spending for periods of time], shoes, toiletries, and entertainment."
It became quickly apparent that one of them was a spender, one was a saver, and one was in between and a complete bargain hunter. When approaching a largish purchase, I ask the bargain hunter what she knows about the item and where to buy. Sometimes when we seek to teach, we end up learning.
It became quickly apparent that one of them was a spender, one was a saver, and one was in between and a complete bargain hunter. When approaching a largish purchase, I ask the bargain hunter what she knows about the item and where to buy. Sometimes when we seek to teach, we end up learning.
38
spender, saver and bargain hunter - any association with birth order ?
e.g. absent that information, I might guess the oldest to assume responsibility - perhaps saving - the youngest to be more spendthrift, I don't need to worry, someone older will look after me - and the middle child to be the bargain hunter ?
e.g. absent that information, I might guess the oldest to assume responsibility - perhaps saving - the youngest to be more spendthrift, I don't need to worry, someone older will look after me - and the middle child to be the bargain hunter ?
2
The very best economic education I ever received was my parents telling my brother and I, from an early age (i actually have no memory of not knowing) how much money they made and how much things cost, and how much savings they had. I knew what the mortgage was and how much the house cost. I knew how much the used cars they bought cost and how much the insurance was. I watched their tax-deferred retirement savings account swell with returns, and then crash in the early 2000s, and then come back.
This is better than any money letter, because it doesn't depend on the parents having learned any lessons at all. I knew what it meant to live within your means. I knew what kind of an income i would need to maintain the kind of lifestyle my parents had - i was shocked that many university colleagues seemed to think that a $50K job would let them live like their parents, who i could tell were much more likely making $250K. They had no idea and it affected career choices adversely. Parents seem to hate sharing how much they make with their kids, I never understand why. Don't dance around an economic education for your children by trying to impart distilled wisdom in a letter. Let them learn with you.
This is better than any money letter, because it doesn't depend on the parents having learned any lessons at all. I knew what it meant to live within your means. I knew what kind of an income i would need to maintain the kind of lifestyle my parents had - i was shocked that many university colleagues seemed to think that a $50K job would let them live like their parents, who i could tell were much more likely making $250K. They had no idea and it affected career choices adversely. Parents seem to hate sharing how much they make with their kids, I never understand why. Don't dance around an economic education for your children by trying to impart distilled wisdom in a letter. Let them learn with you.
60
I could not agree more. I regret not doing this with my kids who are now young adults out on their own. I'm trying to make up for lost time with my son who now sees the need to get that retirement fund going. We looked at mine together. I showed him my spreadsheet that clearly demonstrates the value of those dollars I saved in my 20's versus the ones I'm saving now. Oh and in there are the years in the middle when I skipped out on saving not thinking I could afford it. I believe seeing my own figures was a much more motivational than just telling him how your supposed to do it.
3
Great idea, and making the impact of financial decisions real, while modeling commonsense behavior.
The only thing I think needs more explanation is the caveat, ' Never invest in anything you don’t totally understand.' I knew people, mostly female ones, who delayed investing in stocks and funds because they took this to mean, literally, that they had to become experts. You are unlikely to "totally understand" everything about a company stock or mutual fund: so take steps to learn. But investing in index funds can do the job with less homework - and you do want to begin savings as soon as you can in the work world. A nice free 16 page pdf - for older adult "kids" ( and maybe their parents) is William Bernstein's "IfYouCan" [https://www.etf.com/docs/IfYouCan.pdf ]
The only thing I think needs more explanation is the caveat, ' Never invest in anything you don’t totally understand.' I knew people, mostly female ones, who delayed investing in stocks and funds because they took this to mean, literally, that they had to become experts. You are unlikely to "totally understand" everything about a company stock or mutual fund: so take steps to learn. But investing in index funds can do the job with less homework - and you do want to begin savings as soon as you can in the work world. A nice free 16 page pdf - for older adult "kids" ( and maybe their parents) is William Bernstein's "IfYouCan" [https://www.etf.com/docs/IfYouCan.pdf ]
10
I see the value of this for its intended audience.
Nonetheless, 99% of the U. S. population would love to be in a position to have family discussions about what to do with a seven-figure holding of Citigroup stock.
Nonetheless, 99% of the U. S. population would love to be in a position to have family discussions about what to do with a seven-figure holding of Citigroup stock.
39
My first piece of advice would be to keep ALL your 401K money in safe, U.S. treasuries because "markets" are nothing but craps tables to enrich the top 1% global financial elite. One still gets the same 401K tax breaks with none of the risk. My advice might change when OUR elected leaders regulate greed to bring sanity back into the capitalistic system and turn it into a social capital model.
10
@njglea. In the long run, keeping your 401K money in "safe, U.S. treasuries" is the riskiest thing you can do. 401K money is (or, at least, should be) invested for long periods of time-- DECADES. At 0-1%, you might preserve your original contribution. But, over periods of decades, you'd most certainly do far better in stocks. There will be up years and down years. But over DECADES, your suggestion would be RISKIEST of all-- nearly zero investment return-- leaving you with basically nothing in terms of investment return. Don't try to time the market. Put money in when you have it. Ignore the day to day and year to year ups and downs as they are meaningless. Buy and hold for decades.
40
Paranoia is not a good approach to investing. It is relatively easy to get decent returns over the long term. Index funds for example.
12
Look at the long term performance of the S&P 500 versus any treasury. I don't think gambling at a craps table looks anything remotely similar to the behavior of stocks.
If you're a fool with no ability to control your emotions and panic at the first sign of distress, then I agree; investing in equities might not turn out well. But if this is the situation, don't blame the markets. Blame yourself.
If you're a fool with no ability to control your emotions and panic at the first sign of distress, then I agree; investing in equities might not turn out well. But if this is the situation, don't blame the markets. Blame yourself.
11
A soulful letter about MONEY? Oh brother. Spare me.
8
Just as the sex talk isn't a one time deal, the money talk isn't either. You live with your children for a long time. Show them from the time they are little how you handle money. Show them the necessity of saving. Show them the importance of tracking their spending. Show them how you don't buy everything just because you can afford it. Get them involved in looking to themselves as responsible not their parents. Teach them how to wisely live day to day with a budget and how to monitor their spending. Show them how you donate both time and what money you can afford to charity. Day to day living is the key to having money for investments not the other way around. Investments are a small part of "the money talk". A famous good company (so called blue chips) isn't necessarily a good investment as far as return on your money. A lifetime of example is so much better than a letter.
38
Exactly right!
2
No need to write such a letter. It’s already been done…. Read books that already exist, as follows…
The Millionaire Next Door- Parents read it… Parents LIVE IT… Then, by watching how the parents live, it’s already a part of who your kids are… so no need “to teach” it.
Invest in Vanguard Index Funds, only… Parents, then kids. Buy for the long haul. Hold for decades. Ignore the ups and downs from day to day and year to year. Ignore the people on tv. Just because they are on tv, does not mean they are smart or good investors- most are not.
Then buy these books for the kids to read when they are in high school/college.
Personal Finance for Dummies
Mutual Funds for Dummies
A Random Walk Down Wall Street
Home Buying for Dummies
Done.
The Millionaire Next Door- Parents read it… Parents LIVE IT… Then, by watching how the parents live, it’s already a part of who your kids are… so no need “to teach” it.
Invest in Vanguard Index Funds, only… Parents, then kids. Buy for the long haul. Hold for decades. Ignore the ups and downs from day to day and year to year. Ignore the people on tv. Just because they are on tv, does not mean they are smart or good investors- most are not.
Then buy these books for the kids to read when they are in high school/college.
Personal Finance for Dummies
Mutual Funds for Dummies
A Random Walk Down Wall Street
Home Buying for Dummies
Done.
15
I agree that all of the books you list are excellent. Sometimes family members will pay more attention to parents who have had bad experiences with financial planners and then gone their own way. Everyone is interested in financial planning but they need to hear the details from people they know and love,
10
Good point. Let me modify my original comment...
Great idea to write "the money letter" and to engage in such conversations etc.
Just wanted to say there is a lot of stuff out there to be used instead of or in addition to such a letter.
Great idea to write "the money letter" and to engage in such conversations etc.
Just wanted to say there is a lot of stuff out there to be used instead of or in addition to such a letter.
4
I think the point is the money letter has more meaning coming from a parent or grandparent. I'm more likely to get my daughter to read financial tips interspersed with a couple of stories than a book.
17
The best way to teach kids about money is to show them. Do not give allowances without corresponding chores, and if the chores are not done, no allowance. It's fine for them to keep all the money they earn working while in high school, unless poverty is affecting the rest of the family in which case any decent kid should want to contribute. But once they are out of school, they should be contribute to household expenses, even if the contributions are not needed. If they are in college and unable to work due to academic demands, then they can do the family laundry or cook dinner a few nights a week.
There is no such thing as a free ride and teaching kids that a nice home and plenty to eat and clean clothing aren't free, but the direct results of labor both inside and outside the home, will serve them well.