By Ryan Vogel, CFP®
I have two active healthy sons aged ten and eight. We live in a comfortable suburban area with many professional households. The kids in our area are expected to attend college immediately after high school. My boys aren’t there yet, but they’re starting to notice differences between what they have, what other families have, and how it makes them feel. They’re too young to understand Maslow’s hierarchy of needs, but instead of lamenting the things they don’t have, my wife and I strongly encourage them to be thankful for what they do have.
My older son Reid is very much like me and enjoys saving his money. He somehow managed to save $100--all in quarters. I have no idea how he was able to accomplish this. When I asked him what he was saving for, he really didn’t have an answer. That got me thinking.
Saving is a great habit that we encourage both our boys to adopt. We’re trying to reinforce the idea that having money just for money’s sake isn’t a goal. Money is just a means to an end. As with our clients, I’m constantly asking our boys: “What is most important to you?” or “What are you saving for now and how much does it cost?”
Gratitude Not everyone in our area is super-affluent, but we have more than a few households with eight-figure net worth. I’m sure our kids notice the wealth even if they can’t articulate it yet. Again, we keep reminding our boys to be grateful for all the things they have and enjoy—not resentful for the few things they don’t have. They’re better off than most.
Like many kids his age, my 10-year-old loves video games. He has a perfectly good Chromebook, but he really wants a fully loaded PC so he can take his gaming to the next level. The other day Reid was trying to convince me to help him buy the updated PC. I told him: “Here’s the deal. Based on the money you have saved so far; you can probably get an older PC with slower processing speed and an older video card.” I could tell by the look on his face he wasn’t thrilled. So, I offered an alternative. “You can continue to save your money from birthdays and odd jobs, etc. until you have enough to buy the PC you really want.”
Now I could see the wheels turning in his mind.
We’re not trying to lower my son’s ranking in the ultra-competitive video gaming world; we’re trying to teach him about delayed gratification and about using money as motivation for reaching a goal.
I encourage my boys to use money as a tool to purchase things that will make them happy. We don’t want them to splurge recklessly, but as with our clients, we tell them: “Saving money just to have more money isn’t necessarily a great thing. What do you want to do with all that money you have saved?” “I’m not sure yet,” my older son replied. “But when I do find something I really want; I need to make sure I can afford it,” he added. That made me proud.
Sense of Purpose
Reid is actually further along than some of our clients are when they first come to see us. Often new clients are obsessed with climbing the company ladder or accumulating X million dollars by the time they reach a certain age. Unfortunately, they haven’t taken the time to think about what they want to accomplish when they reach that arbitrary monetary goal they’ve set for themselves.
That’s what I’m trying to convey to my kids. Sure, having money is a lot better than having no money. But money only has value if it can make you happier, or if it can help you accomplish the things you really want to do in life.
For clients who have older kids, the financial stakes get higher. Most of you want to help your kids finance a down-payment on their first home if you can, but you don’t just want to gift them the money with no strings attached. That’s not the right message. Instead, why not incentive them. Tell them: “Whatever amount you’re able to save for a home, we’ll match you dollar for dollar.” That’s not a handout; that’s incentivizing them to save. It’s not all that different from my son and his PC.
That’s one of the benefits of meeting with your advisor on a regular basis. It forces you to take a step back from your busy life and look at the big picture. It will make you think carefully about what’s most important to you and what are you trying to accomplish in your career and your life. If makes you ask yourself tough questions about what you most want for your family and what you want from your money. Only after you have addressed questions like these can we have a conversation about making your money get you there. It may require you to rethink how much you must save or how many years you will need to keep working. We have such busy lives; it’s incredibly important to take a step back at least twice a year to evaluate the direction of your life—financially and otherwise—and if you are really living your values.
On a more simplistic level, you can have the same conversations with your children, regardless of their age. In Part 2 of this post, we’ll discuss ways to teach your kids about charitable giving, delayed gratification, investment patience and how much risk they can reasonably take on when it comes to their money decisions.
RYAN M. VOGEL, CFP® is the CHIEF PLANNING OFFICER, PARTNER at Novi Wealth