CEE Standard: Saving
Teach your students the benefits of financial independence and how to avoid relying on their parents forever. Becoming financially independent is important to growing your net worth and living as an adult.
I left home at 17 and paid my own way through college. It was scary, but my parents had hammered it into me from my preteen years that, “When you’re 18, you leave the house and pay for your things.”
In the last 20 years, aside from birthday gifts, I have received a small inheritance of $8,000 from my mother. Everything else I have? I worked for it. So it shocks me when people around me, well into their 20s — or even early 30s — still get their lives sponsored by their parents. Sometimes it’s just a phone bill “so that we’re all on the family plan.” Sometimes it’s rent and an allowance “because there is no work for me.”
What strikes me, even more, is that some of these parents are retired, and instead of enjoying their golden years, they are tight on cash and worrying all day about the future of their offspring.
When I talk to the parents, they argue that the job market is much harder these days because everyone has a college degree and is willing to work for $1,000. I strongly disagree with the idea that there are no jobs.
Where to Find Jobs
There are tons of tough, low-paying jobs that you may not be willing to take. There are alternative jobs, such as freelancing or consulting, that weren’t that developed when our parents were our age. The world may have changed, but there are certainly ways to make a living on your own.
It is frustrating to study for five years and then be a bartender. But if that’s what it takes, be the best bartender you can be, and maybe one day you will own your own bar.
Your parents are not your financial backup plan. As a matter of fact, I think parents should prioritize saving for their own retirement rather than paying for your college. After all, there are no scholarships for retirees. Besides, if you work hard enough, you can pay your own way through college.
Financing Your Education
There are many ways to finance your education, and as a last resort, you can still get a loan, while your parents won’t be able to because they are too old for new lines of credit. And if your parents were nice enough to pay for your college degree, once you leave the house, you shouldn’t burden them with your problems.
Don’t get me wrong — I am all in favor of the intergenerational transfer of wealth. But only when this is done intelligently, so as to preserve the family’s estate. I approach family money as my own money. What my mom has, she will pass on to my sister and me eventually.
So it is my duty to help my mother grow her estate and enjoy a comfortable retirement, not to ask for money every chance I get. She is still “the bank of Mom,” as I have often borrowed money from her, but only to invest and build my own little empire. It goes without saying that I repay every cent, at an interest rate that is beneficial for both: around 4 percent — more than the money would earn sitting in her savings account, but still less than a bank loan would cost me.
I also encouraged my mom to pay down her mortgage early. That saved her a few thousand dollars, and she has been talking to everyone who would listen about how happy she is to be mortgage-free. She worked hard to be comfortable in retirement, and it would never occur to me that I am entitled to anything she has worked for before she passes.
Money Conversations to Have
The only money conversation we have, aside from my investment requests, are about my mother’s estate planning. I try to help her make well-informed decisions so that the state doesn’t keep 40 percent of what she worked so hard to save. If she wants to give it all to charity, wonderful.
I have already made up my own will and split half of my estate between my teenage brother and my niece, since my sister would have to pay taxes again before passing on any inheritance from me to my niece. I explained that to my mom and told her she should think about writing a will, as well.
Parents, the best gift you can give your kids is a financial education. Kids, make your parents proud and be financially responsible adults. Let your parents spoil you when you go home, but don’t guilt them into paying more than they already have for you.