How to Make Your Kids Better With Money

Dear Dave,

Do you have any advice for teaching responsibility and generosity to adult children and grandkids when it comes to money?

-Justin

Dear Justin,

I think there are three key factors when it comes to teaching children of any age about these concepts—humility, gratitude and contentment. In my mind, humility is where gratitude comes from, and gratitude leads to contentment.

I’m generous to my adult children, but they have no sense of entitlement. That’s due to their personal humility. They don’t feel that I owe them anything, and they already know that anyone who cops an entitlement attitude gets cut off. You’re no longer qualified for my generosity when you lose your gratitude.

You’ve got to spend time talking to kids about these things. Otherwise, you run the risk of them counting on the income. Here’s an example. We coach some family businesses at my company, and the best familybusinesses are the ones that teach non-employee family members who receive money from the business—dividends from the profits—never to live on those dividends. I’ve seen lots of cases where someone will start living on the business they don’t work in, and they immediately start feeling entitled to the money.

The same principle applies in your situation. If someone starts saying, “Well, since mom and dad are paying for our daycare, we can use that money we would have spent to buy a car.” That means they’ve started counting on mom and dad’s generosity to live, and that’s a form of entitlement mentality.

None of our kids receive any kind of financial help from us at all, unless they’re already carrying their weight in their own lives. That’s not being cold. It’s teaching responsibility and self-reliance. Now it would be different if one of them developed a serious medical issue or something like that. But the whole idea that mommy and daddy have lots of money, and I can just get some from them? That doesn’t fly in our family.

You have to teach them character and giving in order for them to be valid recipients. Plus, it’s all about the kids’ attitude. But you’ve got to talk about it often and communicate the value system out loud. The gifting and generosity are contingent upon the humility that leads to gratitude that leads to contentment.

-Dave

Dear Dave,

My wife and I just bought a business with cash. We had been living with my brother and sister-in-law while we saved up, and things are starting to get a bit cramped. My brother has offered to co-sign on a house for us, but rent is pretty cheap in this area. What do you think we should do?

-Peter

Dear Peter,

You need to forget about a house and plan on renting for a while. You just bought a business, and at this point you don’t even know if it’s going to be successful. Plus, if you need a co-signer to buy a house, car or anything else, it means you’re not financially ready for that purchase.

Take some time, maybe two or three years, to get your business up and running. Go find a decent, inexpensive place to rent then pay off any debt you have while saving up as much money as possible. I want you to have a nice house one day, Peter. But you’re just not ready now. A house should be a blessing, not a burden.

-Dave