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How to Talk to Your Kids About Money (Based on Your Income Level)

August 4, 2011 by Justin Weinger

Let’s put off buying those new sneakers so we can start you in a brokerage account. Doesn’t that sound exciting?

In case you couldn’t tell, I’m not a very serious person.  I always liked Margot Fonteyn’s quote, “Take your work seriously, but never yourself.”  I like it because I never take myself seriously, and most of the time I don’t take my work seriously either.  So it works out, you know what I mean?

But for the past year or so, it’s been the serious work of my life to get out of debt.  I like that I am seeing tangible results.  I am at the lowest debt level that I have been at any time in the past two years.  I am reading books that are motivating me to stay on the path of reasonable spending and being on the lookout for opportunities, like The Richest Man in Babylon.   And since I spend a lot of time working on my getting-out-of-debt plan, I also end up talking about debt and money with almost everyone I come across.  Which got me to thinking about how money was discussed with me as I was growing up and how I would talk to my own future kids about money and its significance.   I think about my future kids a lot.  Is that weird?  I want the best for them but I also want them to be thoughtful and caring people.  So I think about how I would bring up money without making it the most important thing in their lives, but rather making it a tool to achieve what they want in life.  It’s a good idea for everyone to talk to their kids about money instead of letting them simply absorb the bad habits or strange inclinations of their parents.  Kids are always observing and they understand a lot more about money than their parents may realize.  It’s worth it to give them a few tips so that they can avoid some of the mistakes we all make.  But the thing about it is, you wouldn’t talk to your kids the same way about money if you were making $20,000 per year versus $200,000 per year or $2 million per year.  The basic principles would be the same, but I think you may consider tweaking some of those ideas based on your income level.

(I know it’s dangerous to generalize, so I am only describing how I would talk to my kids at each of these income levels, and only once they are older, between 10 and 12.)

How to Talk to Your Kids About Money (Based on Your Income Level)

Parents’ Annual Income: $20,000 per year or less

Basic Message:  Please be the beacon that brings us out of this crushing poverty.

Look kids, we don’t want you to have to work for minimum wage just so you can live a soulless existence where you have lost the will to dream and are forced to frequent check cashing stores and get ripped off at every turn.  You’re going to have to work really hard to get out of this socioeconomic level.  Education will be a big part of it.  We’re not going to buy you fancy clothes just because the other neighborhood kids are wearing them.  You’ll have to push yourself when we’re at work, and think of money as something to save, earn and eventually invest.  We’re going to support you in everything you want to do (that’s legal) but we won’t be able to put you in all the classes and sports we want to.  When you get a little older, you’ll see other kids acting a little wild.  The other kids might be able to afford to mess up and get DUIs or blow money on drinking binges, but you don’t have that luxury.  Little setbacks for those kids would be big setbacks for you.  The world doesn’t care if you push yourself and learn and take as much as you can from it.  Only you can care.  And we promise to give you anything we can, and be happy when you become independent and able to support yourself and even us, if you want.  But take care of yourself first.

 

Parents’ Annual Income:  $20,000 to $80,000 per year

Here is the income range of the majority of households.  It’s a pretty big range, and parents in this range can have wildly different money habits.

Here’s what I promise to do:

  • Get my kids involved in sports (actually true for every income level).
  • Encourage them to choose an art/music/other activity to also learn and develop.
  • Tell them why sports are going to help them all through their life.
  • Give them an allowance, help them set up a savings account.
  • Have them set goals once they are in middle school (12 and up) so if they want to buy a car, go to college, or take a cool summer trip, figure out how they can pay for it.  Dave Ramsey has some good ideas on this on his radio show, and he usually advises parents to “match”.   If they save $100 for their car, you’ll give them $100 match.

Here’s what I will not do:

  •  Subtly envy those who have more than me and thus encourage envious behaviors in my kids.
  • Make money the major stress factor in our lives.  Of course, that’s where I am at right now, but that’s why I am changing my behavior so that my future kids aren’t stressed out by money when they are first becoming aware of abstract ideas.  (Funny side story:  My boss has a grandchild who is 9 and he told her, “Grandma, you’re rich.”  She asked, “Why do you say that?”  He responded, “Because you have cable and we don’t.”  Kids kill me.)

Parents’ Annual Income:  $80,000 to $170,000 per year

Another big portion of the population falls into this income range.  Although most of the kids in this range will receive the education that was so important in the first income range, and participate in the sports/activities that are a priority in the second income range, I think what brings it all together is making sure kids don’t feel entitled.  Even though this is a pretty good income level, I want my kids to be motivated to go out and explore the world, discover what they want to do and how they might help their communities.  I think understanding money, saving, and how it will help them do what they want is going to be an important part of that.

Parents’ Annual Income:  $170,000+ per year

The key thing to avoid at this income range is complacency.  It’s still easy to be in a high level of debt even with an excellent income, so as a parent I would want to make sure my child knows that we have a great opportunity to save and invest.  Budgeting and the philosophy of living well below how we could be living will put our values before a bunch of stuff.  We’ll be lucky enough to travel to international destinations but the kids would be involved in choosing a place, understanding how much we’re spending, and setting limits for how much to spend each day.  There are lots of great opportunities at this income level, but also lots of ways to blow through money with hardly a thought, and I want to encourage the former and avoid the latter.

*Exception: $1 million+ per year

Basic Message:  You can do anything, but you can’t do nothing. (That’s a paraphrased Warren Buffett quote)

We’ve been given a lot in life.  Well, you’ve been given a lot in life.  I wanted to get a lot in life and I went out and got it.  Yeah, I stomped on some people’s heads to get here.  But now we have an obligation to society, and I don’t want you to value your money any less just because you didn’t work for it.  I want you to live in comfort, but I also want you to consider the value of money and how you can use the money we have for real uses, whether it’s charitable or a business enterprise that’s going to provide for you and your family.  It’s not our place to flash our money around and pretend like it’s completely trivial when it defines our whole lifestyle.  No.  We are not those people.  Fortune comes and goes, but your character stays the same.  I will help you do whatever you want to do.  I promise not to dress you in head-to-toe Gucci at age 4 and scar you for life.

 

Bottom Line

At the end of the day, it’s really what the parents do and how they act that will effect what attitudes their children take about money and everything else.  No matter how much or how little you make, you can encourage your kids to view money differently than how it is portrayed in a consumer-driven, hypermedia society.  You can help them along the way and show them good behavior, but it will be their decision in the end.

Here’s a little additional reading about the traits that shape us:

 6 Clues to Character

What do you think?  How would you talk about money with your kids?

 

Filed Under: Get Out of Debt, Income Inequality

Hunter S. Thompson: Force of Insanity

August 3, 2011 by Justin Weinger

(Still working on my next post, but in the meantime…)

I have yet to pay homage on this blog to one of my favorite and most influential authors, one Hunter S. Thompson of Hell’s Angels and Fear and Loathing in Las Vegas glory, along with his amazing illustrator, Ralph Steadman.  Gonzo journalism seems so right  and natural to us now and yet we would have never known it if it wasn’t for this guy…

Ralph Steadman's Scar Strangled Banger

 

Objective journalism is one of the main reasons that American politics has been allowed to be so corrupt for so long.  You can’t be objective about Nixon.  How can you be objective about Clinton?     -Hunter S. Thompson

 

Bad Craziness: Fear and Loathing in Las Vegas

 

Filed Under: Self-Development

10 Reasons You’re in Debt (And What to Do to Get Out of It)

July 27, 2011 by Justin Weinger

 

Right Down the Money Funnel

Now, when I say you, I really mean me, so don’t take this as some kind of angry judgement on your (my) terrible spending habits.  I’ve made many mistakes and I am just barely figuring it out, so allow me to analyze a few reasons why you’re (I’m) in this boat…

10 Reasons You’re in Debt (And What to Do to Get Out of It)

1. You Spend Like You’re Rich.  Wow, have I been there.  I almost think my credit cards encouraged violent spending (note to self: trademark the term “violent spending”).  I used to be amused at ridiculous bar tabs and buying designer pants.  If I was spending less than I earned, then there’s nothing necessarily bad about buying designer pants or eating at every fancy restaurant in the city.  But it is a problem if your income doesn’t support that lifestyle.  Eventually, you have to put away some of those expensive tastes until you can afford them, which means you can afford them while still saving and investing 10% or more of your income.

2. You Have a Vice that’s Gone Unchecked.  Is it gambling, drugs or alcohol, shopping, or maybe something freaky, like a silicone doll collection?  Whatever it is, there are obviously some issues you have to deal with, but maybe just as important is the fact that that vice takes up a portion of your income that could be going elsewhere.  There’s obvious ones like cigarettes, but there’s also less obvious stuff like buying shoes every week at TJ Maxx because they’re only $12.99 and that shouldn’t even count.

3. You Buy Stuff You Think Will Impress Other People.  Case in Point: BMW 3-Series.  Enough said.

4. You Think You’re Going To Make It Big With Zero Planning.  I know that you’re talented and smart.  You are probably working on a few things to move your career along.  You should have the same kind of plan with your finances and investments.  What would you like to save each month?  How much additional debt payments can you make each month? What would you like to invest in in the future?  Start researching those things you might be interested in and just learn as much as you can.  Talk to people who invest.  DON’T follow their advice.  Just learn from them and observe their methods.  They could be totally wrong, but you will still be learning more about the markets, not to mention people’s irrational trading strategies.

5. You Have Never Made a Monthly Budget.  If you’re anything like me, the idea of a budget seems unnecessary at first suggestion.  You already know how much you make each month and you know when your bills are due, and if there’s anything left over, you’ll pay your debt or put it in savings.  Well, the budget reinforces everything.  It shows you exactly where you’re spending your money, and you can compare your spending to your income (Hint: Spending should be < Income).  A budget is like a mini New Year’s resolution, you have good intentions and you may or may not stick with it 100%.  But since you will keep making a new budget every month, your budget will slowly begin to reflect more of reality and you’ll feel more confident with each month.

6. You Don’t Look at the Price.  This can be a killer at the grocery store.  Food prices vary from chain to chain (one place has cheap produce, expensive personal care items, the other place has cheap meat and expensive produce, etc).  Consider the price of items and hold off on an item if you can when it’s not on sale.  If it’s at the mall, look for the price, ask if there’s a sale coming up, or consider reason #7…

7. You Don’t Ask for A Better Deal.  This one is so easy and anyone can do it.  Negotiating is an art, and not everyone is comfortable with it, but you owe it to yourself to just start trying it, and you might even decide you like it.  Here’s the rule: Never accept the first price on anything where the price is not on a price tag (or even if it is on a price tag when the price is over $300).  You don’t have to be rude or demanding, it’s just a question: Can you do anything better for me?  Is that your lowest price?  What’s the Good-looking Chick Discount? (The last one may not work for everyone).  If you’re buying something online, you should always do a quick Google search for coupon codes for the store or check RetailMeNot.  What about Craigslist? Did you check it?  This is the only area of financial matters I’ve always excelled at, so I’ve probably tried everything you can think of.

8. You Think More About How to Spend Money VS. How to Earn It.  It actually doesn’t take any special skill to spend money.  I KNOW.  It’s shocking.  Has anyone told Paris Hilton this?  The point is that anyone can walk into Louis Vuitton and buy a $5,000 purse.  But figuring out a way to (legally) earn money by creating a product, offering a service or some other way of making money takes time and skill to develop.  I tend to spend a lot of time thinking about how I would like to spend money (I just need a Canon 60D and new set of living room furniture), but I am slowly letting those go and focusing on things (this blog, investing, etc) that will earn money for me.

9.  You Aren’t Prepared for Emergencies.  Last year, my boyfriend and I found a charming little guest house for rent in a nice part of LA with all utilities included for $1,000 per month.  The landlord was so nice.  We met his kids, he invited us over just to hang out and talk while the kids did their homework and tried to join the conversation.  He totally didn’t mind that we didn’t need to move in for 2 months.  We gave him our $1,000 security deposit and planned to call him as the move-in date got closer.  Well, it turned out he also accepted the security deposits of ten other people, who were also planning to move in within a couple of months and the house wasn’t his but a lady’s whom he was housesitting for.  He ended up being arrested, serving three months in jail for fraud, and then being deported to Austria without ever paying back the $1,000 judgement the DA had awarded us.  So we were out $1,000 and had to find a new place to live in about 10 days.  Crazy stuff happens.  It’s good to have a cash reserve.  Start putting aside just a little bit of money into a separate banking account, even while you’re paying off debt.

10. You Don’t Look at Your Bills/Statements.  I get a little depressed thinking about how much I am paying in interest fees each month.  But I still look at my statements and keep track of balances and due dates with written reminders.  At the end of the day, money isn’t real, it’s just a tool we’ve created as humans to make different moves in this society game.  But it’s still more fun to win the game, so staying on top of your bills and statements means you are taking the first step towards winning the game…

Want more lists about bad money habits?  Keep reading:

10 Reasons You Aren’t Rich

10 (More) Reasons You’re Not Rich

25 Traits of the Not So Well To Do 

Got any more bad habits?  I would love to hear them!

Filed Under: Get Out of Debt

Greatest Songs Ever: Don’t Worry, Be Happy

July 26, 2011 by Justin Weinger

Did you know Robin Williams was in the music video? Keep this song in your repertoire boy!!

Filed Under: Self-Development

Advice from Noam Chomsky

July 26, 2011 by Justin Weinger

Noam Chomsky

“Don’t take assumptions for granted. Begin by taking a skeptical attitude toward anything that is conventional wisdom. Make it justify itself. It usually can’t. Be willing to ask questions about what is taken for granted. Try to think things through for yourself. There is plenty of information. You have got to learn how to judge, evaluate, and compare it with other things. You have to take some things on trust or you can’t survive. But if there is something significant and important, don’t take it on trust.”

(Excerpt from Death of the Liberal Class by Chris Hedges)

 

 

Filed Under: Get Out of Debt, Government, Self-Development

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