Over the last few months, I’ve been reflecting on a conundrum.  I’ve been a financial advisor long enough now to have multi-generational clients.  In some instances, I serve parents, their children and even their grandchildren.  Here’s the conundrum.  When I first start working with clients, almost no one says: “Mia we want to be rich.”  Instead, they say: “Mia we want to achieve complete financial independence so we don’t have to worry about money.”  This leads to a kind of contentment in life that is hard to beat.  

But when it comes to their children, this clarity about what money should do for the family seems to get lost.  Most parents want their children to have a better life than they had.  But this desire can sometimes delude us into doing and saying things that will not help our children realize financial contentment.  If you want your adult children to practice sound financial discipline, live within their means and build long-term wealth, all while truly enjoying life, here are five ideas that can really help.  

 

THE RELATIONSHIP BETWEEN FREEDOM AND MONEY

When I was in high school, the popular activity on Friday nights was to attend a high school game and then hang out with my friends in the local Burger King parking lot.  I know this probably sounds like something straight out of a John Cougar Mellencamp song, but that was my reality.  And yes, I am from Indiana, just like Mellencamp.  

There are two things I find striking about that time in my life as I look back on it now.  First, the entire experience cost my parents next to nothing.  I usually didn’t order food at the Burger King and I could get into the ball game for pocket change.  

Second, I don’t think I’ve ever felt more worry-free in my life than on those Friday evenings.  There was something really enjoyable about hanging out with my friends, listening to music (free music on the radio usually) and just being surrounded by other young people.  It would never have crossed my mind that I needed to spend money to increase the happiness I was feeling in those moments.  Why?  Because my parents made those expectations very clear.  

My parents owned their own real estate company.  They did not draw a regular paycheck.  They lived within their means because they had to.  If they overspent, we all suffered.  I learned, as a young person growing up in that business, that tomorrow was uncertain.  We had to work hard to satisfy clients and to ensure all the details worked out on every real estate transaction or else there would be no commissions, which meant no money to live on.  Most of the deals worked out, but others didn’t.  What we saved today ensured a more stable and secure tomorrow.  

I’m not opining about the “good old days” and how much better things were back then than today.  I’m not convinced that’s true.  But what does seem to have changed is the relationship between happiness and spending money.  Many of the generations that have come before us felt that they didn’t need to spend money to feel happiness and contentment.  Remember when a pick-up dodgeball game was the most exciting thing in your life?  How much did that game cost you? 

For the record, I don’t believe that young adults today are solely responsible for this feeling that to be happy, you have to be spending money.  I believe that successful parents are often the ones creating that expectation, and usually doing so unintentionally.  It is often the expectations we set as parents that determine the level of contentment our children feel.  

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"I'm really passionate about building an integrated plan for my clients. Taxes, retirement, investments, estate planning and so much more. I care about getting the details right."

WHAT IS FINANCIAL CONTENTMENT?

Financial contentment, to me, means practicing certain financial disciplines and feeling good about that, as if you lack for nothing.  What sort of disciplines?  

  • Meeting all of your monthly financial obligations by living within your means, following a budget and avoiding unhealthy debt, like high credit card balances.  
  • Learning to save and invest for the future.
  • Building an emergency nest egg.
  • Having a reasonable lifestyle that you enjoy while finding pleasure in the little things.
  • Being charitable and community-minded and giving back both time and money, if possible.

Once a young person does all of these things on a consistent basis, that should create a feeling of being in control of their financial future.  While they will not yet be completely free from financial worries, they are on a path to achieving it.  This should lead to a feeling of contentment, as if they are doing everything they reasonable can be doing to one day achieve complete financial freedom.  This should cause them to feel that they’re standing on their own two feet and they’re proud of that.  

Yet, based on what I see and hear today, so many young adults do not feel a sense of contentment, even when they might be taking some or all of those steps I’ve described above.  I believe there are many factors that work against young people today, when it comes to feeling financial contentment.  

  • Children of affluent parents grow accustomed to a certain lifestyle while living at home.  It can be really challenging, shortly after college, to replicate that lifestyle on a young person’s salary.  It’s hard to feel content when your lifestyle is half of what it used to be.  
  • There is a very real lack of education today about how to manage money.  More on that below.  
  • When a young person starts making a good salary, it can seem almost unnecessary to practice financial discipline that requires them to delay gratification.  It is especially easy to believe this if mom and dad have a history of bailing them out financially or of supplementing their income on a regular basis.  
  • Many young people do not seem to realize that it took their parents decades of living within their means and saving to achieve the lifestyle they have today.  Among many of my mature clients, I find a reticence to talk about the struggle, about how much sacrifice it took to achieve a lifestyle that is free of money worries.  How are young people supposed to understand that it takes a long time to achieve financial freedom unless they are told these stories

 

FIVE IDEAS TO FOSTER FINANCIAL CONTENTMENT?

If you want your children to feel contentment while working toward their financial future, here are five ideas that can really help:

  • Live it in front of them.
  • Recognize that they’re likely not getting this education.
  • Talk about your values and your experiences.
  • Don’t be afraid to interject your opinions into their financial decisions.
  • Give them a relationship with a financial advisor.   

 

LIVE IT IN FRONT OF THEM

Children grow up with the lifestyle their parents afford, not the lifestyle their parents grew up with.  The mistake we make as parents is that we assume our children understand the difference.  I don’t believe that’s accurate.  A moment ago, I described those situations that made me feel free and happy when I was a teenager.  I cannot imagine, today, having all that much fun hanging out in a Burger King parking lot, although I still enjoy a good game of dodgeball now and then.  
 
My point is this.  As our financial freedoms grow, our tastes also grow.  This can set expectations with our adult children that might not work out to their advantage.  If the only time you feel happiness is when you are spending money, it’s likely your children will feel the same way.  You can afford that, but your adult children probably cannot.  They need to save.  

If you want your adult children to find enjoyment and contentment with the simple things in life, those things that cost nothing or very little, then you should live that by example.  I believe this has two implications for affluent parents:

  • Carefully consider how you spend money and how this communicates family values to your children.  The challenge here is that you’ve likely earned the right to buy nice things and have a great lifestyle.  But bear in mind that every choice you make about how to spend money sends a message to your children.  It says: “this is what we value in this family.”
  • Prize time together that costs next to nothing.  Family dinners, game night, bon fires, family reunions and birthday parties are just some examples.  But you can get really creative with ways to spend time together that cost little to nothing, if you really put your mind to it.  I know of several families who’ve done this and now love it.  Their family bonds are stronger too.  

 

RECOGNIZE THAT THEY’RE LIKELY NOT GETTING THIS EDUCATION

Most schools today do not teach people how to manage money.  Some high schools offer a basic personal finance class, but that usually does not go into much depth.  Unless a person was an economics or business major in college, it’s unlikely they were taught concepts about money management.  How is a young person supposed to know what to do if they were never taught

I find that affluent parents often assume that their well-educated adult children already know how to manage money.  I don’t believe that’s true in most cases.  I think this has two important implications for affluent parents:

  • If you know that your adult children do not have this education, then the best thing you can for them is to ensure they get it.  
  • Once you make that decision, you’ll want to explore options for how to ensure they get not only the education, but also a consistent and ongoing set of practices and tools that help them.  Why?  Because we all know that there is a huge gap between knowing what to do and actually doing it.  

 

TALK ABOUT YOUR VALUES AND YOUR EXPERIENCES

Children seem to want right now everything their parents have right now.  But these young people didn’t see the years of struggle that their parents experienced.  They didn’t see the way their parents had to sacrifice and live frugally.  What’s more, most affluent parents seem reticent to talk about their struggles, poor choices and sacrifices.  I believe this is a mistake.  

Family stories take on the role of mythology.  Stories that are passed from one generation to the next provide insight into what the family values and how experiences, often painful experiences, shaped the character of family members.  These stories become a guide for important decisions your children will face in the future.  Your children need these stories.  

They need to know how long it took you to achieve certain financial goals.  They need to know that you were committed to your goals even when it might have felt like it would take forever to achieve them.  They need to know that the way forward for you was not always clear and that you were making decisions that were often very hard.  

Your children need these stories because they will face the same things, at some point in their life.  How many times have you asked yourself: “I wonder what mom or dad would have done in this situation?”  I know I certainly have.  When you tell your children your stories of struggle and commitment for the long-haul, you equip them with the fortitude to achieve the same results in their lives

 

DON’T BE AFRAID TO INTERJECT YOUR OPINIONS INTO THEIR FINANCIAL DECISIONS

A lot of young people coming out of college are making good incomes now.  But after coaching many of them, I find that they are uncertain about what to do with their money.  The risk to them is that they’ll develop habits that do not support a lifestyle that leads to complete financial freedom in the future.  This is why you should not be afraid to interject your opinions into their financial decisions.  The best way to do this is by asking questions.  This can be a rather uncomfortable thing for parents to do, but I believe it’s advisable.  Here’s why.  

I think this is very different today than with prior generations.  In the past, new college graduates often made a low income until they gained experience.  This forced them to learn to live with less.  For example, when I got my first job right out of college, I carried sack lunches to work every day.  This became a habit and it helped me save money every month.  

Today’s graduates often start making incomes that provide a lot of discretionary purchase power.  This is especially true when mom and dad paid for college and they have no student loans.  Young people in this situation are certainly fortunate, but I believe they are also at-risk.  Let me explain.

  • A young person grows up with affluent parents and a comfortable lifestyle.
  • Their lifestyle was probably quite different in college when they lived on a budget.
  • As soon as their income goes up, they might be tempted to get back to that comfortable lifestyle, the one their parents afforded, not the one their income justifies.

When a young person is earning a good income, does not yet have children and has low expenses, this is the time to build an emergency nest egg and really save, particularly by maxing out tax-deferred contributions like 401(k).  But the temptation is to really spend.  

When my mature clients express concerns to me about how their adult children are spending, I recommend that they start by asking questions, not necessarily making statements.  You don’t need to say: “hey that’s way too expensive.”  Instead, try these approaches.

  • Your adult child drives up in a brand-new car.  You can say: “wow – that car is beautiful.  How can you afford it?”
  • You go over to their house and see all new furniture.  You can say: “We couldn’t afford furniture like that until we were in our 40s.  How did you do it?”
  • Your adult child tells you they’re planning an expensive vacation.  You can say: “that sounds like fun.  How much will it impact your emergency nest egg?” 

These questions, in all honesty, might annoy your children.  If you’re not comfortable doing that, then consider what I’m about to describe below.  

 

GIVE THEM A RELATIOSHIP WITH A FINANCIAL ADVISOR

One of the best gifts you can give your young adult child is a relationship with a financial advisor who will help them budget, set goals and equip them with the tools to track their own progress.  This is something I do on a regular basis with my clients.  Working with my team, we provide financial education, strategies, digital tools and coaching.  It makes a real difference.  

Our services to young adult children help their parents breathe easier and worry less.   Over time, as we help these young people prize financial independence, I find that their sense of contentment grows.  As they become accustomed to a lifestyle built on one day achieving complete financial freedom, they feel as if they lack for nothing.  

 

HOW CAN I HELP?

If someone you care about is struggling to make good financial decisions or feels deprived even though they are making good decisions, we should talk.  My experience in working with multi-generational families tells me that there is probably a lot we can do to bring connection, comfort and continuity to your family.  

 

© 2019 Whitnell & Co.  The information contained in this article is provided for informational purposes only.