Romanticizing poverty and learning financial independence
In high school, I babysat a kid whose parents were pretty well off. And by “well off,” I mean they were crazy rich.
One day I decided to take the kid out for ice cream — my treat. When we got to the ice cream shop, I only had enough money to buy him the small, and he wanted the large. What then followed wasn’t exactly a temper tantrum; it’s probably better described as a communication breakdown. He was legitimately confused as to why he couldn’t have the larger size.
He truly couldn’t understand the concept of “not enough money.” Price was not a matter of quantity to him, but simply a choice — it was like asking whether he wanted vanilla, strawberry or chocolate. The idea that his options were limited because of cost was beyond him. He also didn’t understand that I was treating him. From his perspective, the ice cream was always there for him to begin with — it didn’t matter who happened to be forking over the money.
I recently recounted this story to my mom, complaining about how this kid probably wouldn’t grow up to learn the tenets of financial independence like I did, because he was privileged, and I grew up so poor.
“We weren’t that poor,” my mom said, dryly. “You exaggerate.”
She then reminded me that she truly grew up poor. She had dreams about her next meal. She shared a single room with seven brothers and sisters. My mom reminded me that she lived in a remote village in Hong Kong, for crying out loud.
My own mother was one-upping me in the impoverished childhood department. And she definitely won.
But thinking about this situation, and my mom’s response, I’ve been pondering a couple of things:
- Are privileged kids at a disadvantage when it comes to learning the lessons of financial independence?
- Have I romanticized being poor to facilitate my financial goals, and what are the implications of doing this?
“There is No Success Without Hardship”
Sophocles said this. In my case, I’ve found it to be true. Growing up “poor” forced me to learn the tenets of hard work, responsibility and resourcefulness — qualities that have helped me find success in my endeavors. My mom had even less money, and she learned those lessons even more thoroughly. To this day, I’ve never seen anyone more frugal or with more self-control than my mother.
So I grew up believing that wisdom comes with adversity. But thinking in terms of financial independence, what does this mean for those who grow up privileged? It’s usually a parent’s goal for their children to grow up without financial hardships. Consequently, can those children learn the lessons of personal finance just as powerfully without going through all the tough stuff? Can we be wise without having to endure adversity?
How Much Can You Learn With a Safety Net?
Of course it’s possible for the privileged to learn to be industrious and diligent and all of that, but I feel like the lessons are much different when you have to learn them. Here’s a somewhat nerdy example.
In The Dark Knight Rises (spoiler alert) Bruce Wayne must escape his prison by climbing to the top of a deep pit and leaping out of it. He tries this a few times while secured by a rope — his safety net. He’s unsuccessful each time. Then, he decides to try the escape without the rope — the motivation is, if he doesn’t succeed, he’ll fall to his death. Of course, Wayne finally succeeds without the rope. His will to survive leads him to accomplish his goal. He succeeds when there is no other option but to succeed.
I know it’s just a movie, but it’s also a parable. So I ask myself: How successful can you be in learning the lessons of value, responsibility, etc., when you’ll be totally fine if you don’t?
The Problems With Romanticizing Poverty
I plan to have a safety net for my own kids. In fact, I don’t plan on having kids until I can afford to have a safety net for them. Does this mean they’ll grow up at a disadvantage when it comes to financial independence? Will they have less success because they have less adversity? How do I teach my kids to be financially independent when I plan to give them a financial safety net?
Second, even though I finally have some financial elbowroom and am able to live comfortably, I still have this “impoverished” mindset. I discussed this a bit when I wrote about not buying a new computer because I didn’t feel like I’d suffered enough to afford a new computer. This mindset has kept me from enjoying the fruits of my financial independence. Exaggerating my poorness has worked in my favor in the past, especially when I needed to save money to pay off my student loans. But these days, it’s given me a false sense of insecurity. And why else have I worked so hard for my financial independence if not to feel secure?
Another issue I have with romancing poverty is that it’s kind of condescending.
Like a lot of lower-middle-class families, in our household, we always had this subtle resentment of people who, as my dad would say, “had everything handed to them.” I have a friend who’s embarrassed by the fact that he’s had everything handed to him — there’s this unspoken shame you feel when you tell people you didn’t pay for your own lifestyle.
And that’s not really fair. Why should there be a sense of haughtiness for people whose parents provided for them?
My mom also pointed out that it’s about perspective. What I considered “poor,” many people in the world would consider incredibly wealthy. It’s insulting to call it “poverty” and say that I grew up poor when, really, we may have struggled to pay utility bills, but we always had food.
At any rate, I’ve been mulling over these thoughts in the past few weeks, especially in wondering how I’ll teach my own children financial independence. So I have a few questions:
Do you think impoverished kids learn the tenets of responsibility and hard work more intensely or effectively than privileged kids? Basically — is there a personal finance advantage to growing up poor?
How do I go about teaching my children the importance of finance, responsibility and self-sufficiency when I plan to give them a safety net?
Does an impoverished mind-set keep you from enjoying the freedom of financial independence?
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There are 103 comments to "Romanticizing poverty and learning financial independence".
I believe finances are about balance and educating your children. People with means should not always give their child the largest ice cream. If the child wants something bigger or more, they should be encouraged to save for it. People with financial security need to teach their children the value of money rather than overindulging them. I point out to my children that coupons are just like money. I have them do the math to find out how much we will save. They understand the value of a dollar.
I also believe hard work deserves a reward. My parents had that impoverished mindset when I was younger. Thankfully, they are financially secure but they also needed to learn the fruits of their labor. If a person gets an extra job or additional work hours, that money can be put into something special once in awhile, as long as the bills are paid and they have insurance, savings, etc.
Having grown up in a family where we had living necessities but not too much else (we took the occasional long weekend to stay at an uncle’s beach house for vacation, summer camp or activities beyond girl scouts were out of reach financially), here is what I learned:
-You can’t really get ahead
-There’s no point or possibility of planning for better things in the future (you’ll retire when you die)
-There’s never enough money
-You do your job because you need to put food on the table, you don’t choose your job it chooses you, if you happen to like it that’s a perk
-Finish paying off the car? That means you can afford to eat out more or buy new furniture.
I figured out that education was the way to freedom, so I worked hard at that and have a career that I’ve trained for and enjoy. I definitely learned a good work ethic from my parents, but did not learn the savings/investing/waiting aspect of personal finance from them. I’m very fortunate now to live comfortably and set aside for long-term and medium-term goals, but there is always a concern that I’m not saving enough.
When I was applying for college, I got in and had some pretty generous scholarship offers, but most of the schools I applied to would still cost some money. The school I really wanted to go to was going to cost $5K out of pocket (maybe 1/3 to 1/4 the total cost at the time). I asked my mom if there was any sort of college fund for my sister and I, and she laughed at me. My grandmother offered to pay it, for which I have always been grateful.
TL; DR – I think if your kids are aware that what they get isn’t free, but is something that you work hard and plan for to provide for them, they will be at a real advantage.
I think it is less about how much money you have and more about how you educate your children about money. Whether you are poor or rich your children will tend to learn you attitudes towards money. If you manage money well and let them see you do it, they are more likely to manage money well themselves.
However, if you are ‘rich’, you do need to be aware of not overindulging your children and consciously teaching them the value of a dollar. Give them an allowance and expect them to buy some categories of purchases for themselves so they have to learn to save and value their money. Don’t bail them out when they really want that big toy, but don’t have the money for it. Make them wait and save for it.
The other issue with having more affluent parents (and I speak from experience) is that you become accustomed to a certain standard of living (which may not reflect your parents’ standard of living when they were starting out). The expectations created make it harder to lower your expectations when you are young and just getting started. However, if you have absorbed positive messages about living within your means and the importance of saving, you will tend to adjust.
Some great points – thank you! I think it can be very hard for parents to teach “the value of the dollar” since if you’re affluent a dollar really isn’t worth much. Value is about how much things mean to you individually and I don’t believe you can define a universal value for something.
You can do all the right things for your kids by making the safety net invisible. That money should be sitting in various investments, not to be touched. The safety net is not so there will always be ice cream, but so there will always be healthy food on the table. It’s not so they can buy their favorite electronic device with one week’s allowance, it’s so they don’t have to babysit to help pay rent.
Some possible ways to teach: make them earn their allowance with chores, limiting the allowance so they have to choose between small item immediately or saving for a better item, and when you buy large items for the family (computer, furniture, etc) have them sit with you (and spouse?) as you guys discuss benefits vs cost so they learn how to judge value (i.e. a cheaper, poorly made item isn’t necessarily better than a more expensive sturdier item). Above all, lead by example and talk about your decisions with age appropriate language.
I grew up in a middle class neighborhood and we were on the lower end of middle class and many of my classmates were on the higher end, sometimes the way higher end. As a teenager this was not always an easy thing to navigate when your friends could not understand why you had to work every day after school or why your parents just couldn’t buy you a plane ticket to go with them on spring break to some tropical island. What I find most interesting from growing up in this scenario is how people react to it. I am the oldest of four siblings and we each took away something different from the situation.
I work hard, practice delayed gratification, and try to save and invest to give myself opportunities and feel secure. Sibling #2 pursued a career stictly based on money and his whole goal in life is to make sure he has “the most” in his circle of friends. He even moved to a poorer area so he could be the big fish in a small pond. His children have the latest and greatest and he would never use a coupon because he doesn’t want anyone to think he is poor. Sibling #3 decided the best way to get what they wanted was to mooch off of people to acquire things. Sibling #4 works really hard but is too afraid of what to do with money when they get it and so lives with the poverty mentality of spend it when you get it because you’ll never know when this will come around again. All four of us were raised by the same two parents in the same neighborhood. Go figure.
I do think that on average most people appreciate things when they’ve had to work at it but on the reverse of that we have friends whose parents are millionaires and they themselves live a middle class lifestyle. Their parents have taught them how to deal with money from a young age and while they didn’t want for much, they are appreciative and are good stewards with the money they earn.
Perhaps it has to do partly with your situation, partly with your personality, and partly with your value system.
I think that just goes to show how little parenting controls how kids grow up in some ways! I have two siblings as well, and we’re all completely different (I’m financially independent but don’t make much, one still lives with the family because he spends more and wants a higher paying job before moving out, and one is a good steward with his money but can’t earn much or be totally independent due to disability). I think kids can take lessons from their families and environment and interpret them in totally different ways.
Whoa — can I make a suggestion to the editors of GRS? Don’t put Kristin’s articles right next to Honey’s. It only emphasizes the problems with the latter.
This was truly a great exposition on money and how your upbringing influences your perspective on finance. I loved the comment about your competition with your mom in the “impoverished kid department”. On a smaller scale, my mom and I play that game. I can’t tell you how many times she has mentioned how she and her brother essentially shared a closet with a bunk bed throughout their childhood. This puts any “hardships” I experienced as a child in perspective.
I think children rich or poor can rise above their upbringing and be different (for better or for worse). But I do think if someone grew up rich, it possibly makes it harder if you experience financial adversity later in life. Like the ice cream (great anecdote, by the way), you are not as used to less and will probably struggle with the discrepancy between what you had and what your new reality is.
For the rich, I think one of the most important lessons for your kids is to teach them gratitude and a proper perspective on your wealth. But, unfortunately, what I think usually happens is that the child never realizes how lucky they are or their respective place in the universe.
The New York Times had a great blog post about how the child of parents who made several million dollars a year asked them if they were rich in a public situation. The quick response he received was, “No!” I think that is wrong. Perhaps they were embarrassed, but I find it worrisome if they truly don’t recognize their wealth. Of course, it’s all in the eye beholder. Perhaps in their minds they were thinking, “Well, I’m not rich compared to the hedge fund manager down the block….”
I grew up privileged but was always taught about money. I had a small allowance and my parents gave me a savings account at 12 to learn about money responsibilities. My friends had crazy allowances or just daddy’s credit card, but if I wanted more I had to work for it. So I babysat, gave piano lessons and so on from age 13 and was lucky to be somewhere parents were able to pay for tutors and nannies. I still have friends who have no idea about money and have always lived off their parents or now husbands but most were grounded by other activities (charity, girl scouts) and knew the value of things.
Really interesting, thought-provoking article.
It sort of reminds me of a moment in my high school English class. We were practicing writing college essays, and we were paired for a peer review, assigned by the teacher. I was paired with the richest girl in school–the girl who drove a Hummer, who had tennis courts in her backyard, and whose parents were both doctors. I wrote a story about how our finished basement flooded over the summer, and how it ruined furniture I’d had my entire life, and how hard it was to watch my Mom, divorced and a school teacher raising two kids, struggle to save up to replace furniture and carpet. The other girl wrote about sailing with seven friends in the Caribbean. She could not for the life of her understand my article. “Was she crying because it’s annoying? Who cares about an old desk? Yes, that was one of my boats I wrote about, I have three.”
I think a lot of it is nurture but also some of it is nature. The parents need to teach the lessons, but the kids need to be receptive and put it in to practice. I think in some situations a really smart, financially aware child can over come poor parental lessons with money.
I wouldn’t say I grew up poor at all. We didn’t take vacations or drive Ferraris, but we always had food and clothes. My mom and her sister were stinking rich as kids in the 70s. I mean filthy rich–their father and his family had built up a coal mining equipment company and were literally millionaires. But after my grandparents got a very messy divorce in the 80s, a lot of that money was gone.
As a result, my mother was fairly frugal and good at saving, even before she divorced my father; she had had a lush childhood with everything she wanted, but was responsible with her money, though always generous. Teachers don’t get paid in the summer, so she saved all year so she could stay home with us during the summer months. She has no debt and is still lives very comfortably. My aunt, however, buys a new car every six months and goes on cruises three times a year. she and her family are up to their eyeballs in debt, despite her husband making hundreds of thousands a year. (My grandfather, btw, died penniless, with nothing. His second wife cleaned him out long ago.)
Parents are incredibly influential when it comes to learning money skills (as they are with many other traits and habits as well). But I think there’s a good sense of nature as well. Some people just aren’t going to learn, no matter how great an example they were given. (My sister comes to mind. But lord that’s another story.)
But Kristen, you romanticize poverty right here:
“His will to survive leads him to accomplish his goal. He succeeds when there is no other option but to succeed.”
This idea that growing up poor means you’ll be scrappy and street-smart instead of rich and spoiled is erroneous (http://www.economist.com/node/15908469).
Instead, growing up poor means that you have limited access to resources like education, credit, capital, and professional networks, making it all the more difficult to succeed, however desperate the situation.
Of course, we all know anecdotal evidence of people who grew up rich and are now adrift, and people who grew up poor and “succeeded because they had no other choice,” but the reality for most people is that poverty begets poverty and wealth begets wealth.
Yes, yes, yes.
The Economic Mobility Project by Pew Research shows us that 65% of individuals born into the bottom fifth of incomes stay in the bottom two fifths (and 62% in the top fifth stay in the top two fifths). http://www.pewstates.org/projects/economic-mobility-project-328061
Many individuals who are truly wealthy don’t have to know how to be frugal. They are on a life path through private schools, connections to wealthy individuals to find jobs, and inheritance that make it unlikely they will ever need to know. Sure, you hear anecdotes about this or that wealthy individual burning through their trust fund, but the statistics tell us that most will stay wealthy.
Likewise, this story of being poor giving people the skills to climb up by their bootstraps isn’t reality for the majority of people in that group.
kdice says – “The Economic Mobility Project by Pew Research shows us that 65% of individuals born into the bottom fifth of incomes stay in the bottom two fifths (and 62% in the top fifth stay in the top two fifths).”
However, looked at the other way, this statistic tells me that fully 35% of the poorest people are able to work there way up to at least the mid-percentiles of income. To my mind, that is GREAT odds, especially since I would guess that at least 65% of those born into the lowest levels of income demonstrate little initiative to climb above that. Those with a modicum of creativity, hard work, ambition, luck, etc., can be successful.
“I would guess that at least 65% of those born into the lowest levels of income demonstrate little initiative to climb above that”
And how many people born into wealth (or even the middle class) have the “initiative” to climb higher or even just maintain their status completely on their own, rather than just relying upon established networks and familial safety nets?
Poverty affects your life in so many ways from the time you’re very young, and often produces lingering effects that can never be fully erased, no matter the interventions.
Those are terrible odds! Think about it — ability and luck are on a bell curve, with most people clustered around the average, and with extremes rare on both sides. Now imagine that you’re born in a family that’s in the lowest fifth economically. If your life depends just on your ability and your subsequent choices, there’s a 20% chance that you’ll stay in the same place socioeconomically that you grow up in, and a 40% chance that you’ll be in the bottom two-fifths (and so on). So if outcomes were based only on ability and merit, we should expect 60% of the people born in the lowest fifth to break into the middle class or get outright rich. However, according to this, only 35% do! There’s inertia to socioeconomic class — it’s determined by way more than chance and ability alone.
“Of course, we all know anecdotal evidence of people who grew up rich and are now adrift, and people who grew up poor and ‘succeeded because they had no other choice,'”
Exactly. You know how you hear about the once in a million incident of a plane crash, but not the thousands of drownings that cause a lot more loss of life? The everyday just isn’t exciting enough to make the news. The underdog beating the odds makes a great story, as does the high and mighty brought low. We say beating the odds because odds are it won’t happen.
Paraphrasing Dan Gilbert, “If you hear about it on the news, you can almost be certain that it’s rare.”
http://www.ted.com/talks/dan_gilbert_researches_happiness.html
Regarding the questions raised in the post, it is absolutely possible to be brought up to appreciate financial responsibility, even when you’re comfortable. I grew up in an affluent community, but we drove a Toyota in streets filled with Mercedes and BMWs. My mom clipped coupons to save at the market, and my dad was strict about not leaving lights on in order to save on electricity. By growing up in this environment, I learned to look for ways, both large and small, to save money. By being sufficiently well off, I could actually learn from these experiences rather than spending my time worrying when I’d have my next meal, or if I’d be the victim of gang violence.
Maslow says we need a stable, safe environment before we can worry about things like financial responsibility. There’s definitely a middle ground between having kids grow up in true poverty and giving them everything they want.
“Instead, growing up poor means that you have limited access to resources like education, credit, capital, and professional networks, making it all the more difficult to succeed, however desperate the situation.”
Good point! And I’ll add to it. My mom is one of those anecdotal examples of rising from poverty, and she definitely used what you call “scrappiness” to get to a comfortable place. Which is great, but she never really learned much about investing, retirement accounts, professional networks or anything like that. When I was little, her savings account consisted of a shoe box in our closet. So, anyway, here’s where my example supports your point–she once tried to convince me not to take a job that paid double what I was making. She thought it best not to mess with a good thing–a stable, albeit low-paying job. Luckily, I went against her usually sound advice and took the job that paid more. The new job was a more accurate salary for what a technical writer should be making. Another example–I recently told her about my IRA investments, and she cringed at the very thought of investing. She didn’t seem to understand the benefit of the concept and likened it to gambling (which I guess isn’t too far off, but y’know).
She’s done pretty well for herself, but yes, I see how a limited access to resources and knowledge can work against someone who grows up impoverished. (I love you mom!)
It all comes down to how parents, whether they are affluent or impoverished, teach the children to relate to money and things. It’s certainly possible for parents to have all the money they could want and at the same time teach their child what the value of a dollar is, and that things and treats all cost money which is a limited resource.
Spend money on your children if you have it, sure. But do it in a way that actually enriches their lives and helps them understand the world.
Love your comment 🙂 I’ve taught well-off kids you wouldn’t guess came from money and kids from struggling families you’d think were rich based on their attitude and belongings.
IMHO, you can give people financial tools like how to save and budget, but personal finance is also about values. Growing and managing one’s wealth requires patience, gratitude, humility, contentment and generosity. I think you can find those qualities (or a lack thereof) at all income levels.
I whole-heartedly agree with this! It comes doen to how the child was raised, regardless of the family’s wealth!
I went to a boarding school on financial aid, so I was a kid from modest means surrounded by rich kids. I was also with kids who came from families with much more limited resources than mine – think a family of 5 in a 1 BR apartment in NYC vs. my family of 4 in a 3 BR house in MA. Yes, there were rich kids who obviously didn’t have a care in the world and regularly went on lavish vacations. Some kids were even able to charter a plane to Bermuda for a long weekend.
However, other kids, some of them my close friends, one of them my high school sweetheart, while wealthy were not spoiled. They had been taught the *value* of money and hard work. Could my boyfriend’s parents have afforded to give him a Saab on his 16th birthday? Probably. Did they? NO! And when a classmate got a Saab on his 16th birthday was my bf jealous? No – he was pretty horrified, actually. He thought it was absolutely ridiculous that our classmate got a car like that. When my bf turned 16 he didn’t even get a car – he had to share the old Volvo wagon with his brother.
Also, as someone else mentioned, perspective is also important. I worked with someone whose family is very wealthy – Manhattan penthouse wealthy. He had a freaking CADILLAC at college! But, is he spoiled? No, because he has perspective. He recognizes that it’s pretty crazy he had that kind of a car at school. He also recognizes that it’s even crazier that many of his classmates had even fancier cars at school. (He went to a college that had a lot of rich kids. Their full tuition payments and donations help subsidize the financial aid for the other 99%.) Now, if he didn’t have that perspective and thought everyone not living his lifestyle were just a bunch of lazy losers I would have hated him. But I didn’t because he grounded and wasn’t arrogant or entitled.
I would say my values about money are probably very similar to mu high school sweetheart’s and former co-worker, even though we’re from very different economic backgrounds. The only difference between me and them is that they never had to worry about whether they could afford to go to college, and it was probably much easier for my ex-bf to come up with a down payment than it was for me. But, if asked, I’m sure he’d readily acknowledge those differences.
“It all comes down to how parents…,”
Limiting the outcome to a single party, i.e. the parents (i.e. teacher) and not the child (i.e. learner), is limiting the explanation of the outcome.
You can take any family with the same parents and a very similar upbringing of the children, and wind up with very diverse children due to various external forces and each child’s inherent nature. It likely has much more to do with the individual learner (i.e. child) than the teacher (i.e. parent).
Think back to 30 of us in the 3rd grade learning our times tables from the same teacher in the same style. Why did some of us understand so much easier than others? Maybe the teacher’s style clicked with us better? Maybe we had a natural gift? Maybe our parents and tutors were helping us at home? Maybe a lot of things, but the constant was the teacher and his/her teaching style, the variable was the child and their learning style (or access to external forces).
In my own experience, my siblings and I all have three very unique views on money, lifestyles (by choice) and standards of living, but we all grew up in the same household with the same large ice cream.
And now, one of us can afford plenty of large ice creams, but won’t even go to the ice cream shop for a small, one of us can afford plenty of small ice creams, and enjoys going to the ice cream shop for a small, and the last one of us can’t afford a small ice cream, but enjoys going to the ice cream shop for a large.
Three very diverse viewpoints on money, all from the same school of thought.
I think the misconception is that a parent can apply the same teaching style to both (or all) of their kids and expect the same result. The key is understanding your children as individuals, how they learn differently, and how each one may need different lessons to learn the same concept. I hear parents say it all the time, “we raised them the same, but the one just doesn’t get it.”
Of course not. It’s because “the one” likely has an entirely different learning style than “the other.”
In short, is there a personal finance advantage to growing up poor? I doubt it. It depends what the child learned from a “poor” experience. I would venture to guess that frugal parents create non-frugal children, just as often and non-frugal parents create frugal children.
“And now, one of us can afford plenty of large ice creams, but won’t even go to the ice cream shop for a small, one of us can afford plenty of small ice creams, and enjoys going to the ice cream shop for a small, and the last one of us can’t afford a small ice cream, but enjoys going to the ice cream shop for a large.”
What a great use of Kristin’s anecdote! Thank you for the laugh and the insights. May I ask, which one are you? The middle one?
Jane says:
03 January 2013 at 12:41 pm
“And now, one of us can afford plenty of large ice creams, but won’t even go to the ice cream shop for a small, one of us can afford plenty of small ice creams, and enjoys going to the ice cream shop for a small, and the last one of us can’t afford a small ice cream, but enjoys going to the ice cream shop for a large.”
What a great use of Kristin’s anecdote! Thank you for the laugh and the insights. May I ask, which one are you? The middle one?
I’m actually the first one. I have plenty of money to buy the large ice cream, but I have a very difficult time spending money on ice cream, in addition to almost anything else.
I struggle to spend a few dollars on items sometimes.
I think the role of the learner is really important. I saw it all the time when I was teaching. Some learners will brush off what they learn or think it doesn’t apply to them, and some will take lessons to heart. Personality plays a big role, not just environment.
Adjusting the delivery of the message to the audience is important, but the core idea of teaching kids about how money works stays the same. A parent (ideally) isn’t teaching one child how to have a healthy relationship with money and their other child that they are entitled to everything.
Also many kids grow up in the same house and turn out differently because the concept of money wasn’t actually “taught.” The kids just observed their parent’s behaviour and each learned a different lesson.
“But do it in a way that actually enriches their lives and helps them understand the world.”
Love this; it’s something that’ll stick with me for sure.
I grew up one of 3 kids in a single-parent household so money was always very tight but we always had what we needed and then some. My mom was extremely frugal but she never taught us about money and so as a result we did not appreciate her frugal habits at all and my brothers and I have had our own issues with money as adults.
Now that I’ve finally got my own head on straight I see that growing up that way made me understand the connection between hard work and having a better lifestyle, and the benefits of living a low-cost, simple lifestyle. Today DH and I are committed to not indulging our own son with material goods or granting his every wish, regardless of whether we can afford it. What we currently see with many of our friends/family of every income level is them spoiling their kids, on cash or credit. We’re adhering to more old-fashioned child-rearing principles, and in the near future (he is 3 now), we’ll be working to teach him about money in more hands on ways. But for now, yes, he has heard many times that something can’t be bought because of the cost. He has even heard that if he wants a new toy he may have to sell an old one (I was surprised at how quickly he picked out what to sell!)
My take away from these experiences is that no matter what your income level, it’s bad to NOT teach your kids how to manage money and it’s bad to spoil them. Universal laws!
I like the direction and outlook that you have BC. I grew up in solid middle class small town Iowa, not rich but not poor. My folks have always been tight with money because they definatly “lived hard” in the 40s and early 50s. No running water or electricity on the farm for Dad untill he was 12. I have written before how my Parents and Grandparents have greatly influenced my monitary habits and like Kristen was always told by Mom/Dad that it could always be worse, just ask anyone who lived through the Great Depression and WWII. This is why DW and I are trying to raise our daughter with a frugal mindset. She is expected to do chores around the house and has a garden with her name on it waiting for her. She is also going to have to go out and find work when she is old enough. There were many people that I grew up with that were from well off families but the children were expected to work and learn the value of money. I also knew a few kids that were spoiled and treated dollars like toilet paper, and now dont have a pot to #### in. The biggest thing I think we can teach others about money is that it sucks to be poor, (been there) and all of (U.S.) need to live within our means and save something for the rainy day. “Teach your children well”. Good topic.
I babysit for a really wealthy family occasionally and they teach their daughter financial responsibility. Their daughter wanted an iPad for the longest and they could easily buy her one. She was required to save her money and she did just that. She goes to an elite private school and they vacation for several weeks at a time but she has to save up her money to buy these items that aren’t necessities.
When I was a kid (only 10-15 years ago) it would have taken almost 4.5 years of my allowance to save up enough money for an iPad!
This was a great, thought-provoking article. My parents were married during the Depression; basic necessities were scarce and not always available when they grew up. They had the impoverished mentality and were always afraid to spend any money, a fear which was compounded by the heavy burden of enormous medical bills due to a catastrophic illness during their marriage. I am still trying to adjust my own attitude toward money to one that is healthier, all these years later. I was taught nothing about handling money; neither was my husband. As witnesses to the crash of ’29, our parents taught us that only a fool would invest in the stock market, so we weren’t taught investing, either. But, both of us WERE taught to work hard, educate ourselves, and reach for something better. We always knew we had no safety nets; my parents did not loan or gift money, and his parents died when he was young. We had a safety net for our kids, but never told them so. We helped with college expenses for them (we paid their rent), but they had to earn scholarships and work during their school years, paying for their own utilties, gas, food, books, etc., and they are successful, responsible adults today. I see so many adults in our community who still, at middle-age, depend on Mom and Dad to bail them out when they get in trouble financially, or expect their old parents to take over some of their everyday expenses, such as child care, as some sort of entitlement, and the old folks usually comply. Then the adult kids are devastated when the old folks die, because their easy access to money is gone and they’ve never had to be truly responsible for their own expenses. It’s crazy.
I didn’t grow up poor or wealthy. I had what I consider to be a a middle class upbringing. I know now that it really is all about perspective but I also think its all about hard work. My grandfather took a mediocre, small, family business and over 60+ years refined and honed it into a still small but still existing business. The hard work isn’t in his business but in his personal life where he invested one-third of his paycheck, saved a third and lived off a third since his first day of work in 1950. My parents worked hard to give us a good childhood but we couldn’t get everything we wanted. My grandparents blessed us with an abundance of gifts for birthdays and Christmas but even then there was a limit. My cousins, however, have been given everything they ever wanted from birth. Even my grandparents, with my older cousin being my grandfather’s namesake and undisputed favorite, lament the fact that they are so spoiled. They are both good-hearted, good-natured young adult/teens now but I have witnessed many episodes like the one you mentioned. Times when it just didn’t compute for them that we couldn’t afford an expensive swimsuit while on vacation together or, 15 years ago, why my mom wouldn’t buy a $60 Power Ranger toy. They just got a $400 kitten for Christmas that was an expectation, not a surprise. My older cousin is now on the verge of adulthood and has a serious girlfriend who also enjoys the finer things in life. I worry for them when reality hits that there is a budget and a limit to spending and that they can’t necessarily have the brand new cars and big, fancy house immediately after getting married. (I blame McMansions on my generation that didn’t want to work up to the fancy houses but that’s not why I’m commenting.)
My grandfather, who scrimped and saved and invested, has been enjoying the fruit of his labor. My mother remembers the years of going without new toys or clothes. My father had a similar childhood with both parents working so he could attend a prestigious private school. I grew up always being told “we can’t afford it” and I now find myself parroting that to my husband, who wasn’t taught that you can’t have everything. Not spoiled, but not aware either.
All that rambling to say that, regardless of whether we really can afford it, my kids will not get everything their hearts desire but they will be fed, clothed and occasionally given gifts above expectation. I love them enough to teach them early that life has limits but the best joy and happiness comes from the love of your family.
(How is that for a feel-good ending to a long and rambling comment?)
I agree with this-to an extent. I’ve grown up “poor”- with my parents barely affording the basic utilities (but always had food). I’m currently at an Ivy league institution for my graduate degree and the differences in mindset between me and my colleagues is always really interesting.
I think one of the big mental differences between growing up poor versus growing up financially provided for is what makes you proud. I’m proud of my success and how far I’ve come. Some of my wealthier friends are proud that their new car that was given to them is nicer than everyone else’s. They don’t understand the pride that comes from earning or succeeding because they’ve never really had to buy their own car.
Other of my wealthier friends had the safety net you talk of. They know they can ask for money from their parents if they need it; however, with that money comes disappointment. They were taught that the lifestyle they grew up with will be unattainable for them for a few years- and that’s completely okay and expected. They were taught that they have to rely on themselves first. That their schooling will be provided, but once you’re an adult, you’re on your own. Honestly, seeing some of my friends with parents who taught them to be self-reliant but know there is a safety net if something terrible happens are the people I want my kids to be.
Generalizations are fraught with peril. Donald Trump’s father was a millionaire many times over. Regardless of your opinion of Donald Trump, he certainly has succeeded; thinking of your Socratic quotation, however, how much “hardship” did he face? Many other examples probably could be shared of people who faced little to no hardship succeeding and, conversely, people who endured tremendous hardship NOT succeeding. Your ice cream ancecdote aside, plenty of rich people are tight and track their money ruthlessly, which helps them to preserve their wealth.
I grew up in a family that lived beyond its means. We always had enough, I was never denied anything, but there was always this underlying tension about it all crashing down around us. It played a big part of why I always have been careful with my money and always have an emergency fund.
I’m pregnant with my first kid now and have started to think about this. We have plenty (not extremely well off but doing well). Our plan is when he or she is old enough (5 maybe?) we’ll start an allowance that corresponds to his/her age. $5 a week at 5. He will have age appropriate chores to do each week. Once he does the chores, he’ll get the money. 10% will go into a jar for college, 10% will go into a jar for charity. the rest will be his to do as he pleases. Correspondingly, we’ll only pay for necessities and occasional treats. He’ll need to buy anything else he wants. I figure this will teach him by trial and error how to save and budget. If he blows all his money on candy and his friend has the “it” toy, well, that is the essence of short term satisfaction vs. long term.
I also hope to show him how his charity money is working. Asking the local animal shelter (or homeless shelter, etc) to give us a tour and have him see how the charity jar money is going to help others less fortunate.
Of course, this is all in theory but that is my plan. I don’t think you need to be close to losing everything to be taught the value of money.
I really do believe that to succeed you must endure hardship. Many of our leaders hard to overcome numerous obstacles to get were they are today.
Warren Buffett nor Bill Gates ever endored hardship and they both seem to know the value of money.
Great article, very thought provoking.
I grew up in an upper class community. We certainly weren’t the wealthiest, but we had many luxuries in my family and never worried about money.
My parents paid for college, but since I elected to stay for a summer semester they made me pay for that and I came out with student loan debt. I was angry with them at first because I felt like they could have paid for that, but in reality the stock market had plummeted and my family was in dire straights.
I am now very grateful that they made me stick it out on my own. While they gave me all the tools I needed (an education, etc.) they did not give me handouts once I was out of the house. If things got really bad I could have moved home, but I knew I was responsible for myself.
I wound up racking up $13,000 of credit card debt, and it was only when I hit bottom that I started to learn about how to manage money properly. So in a way, I do think that being “poor” (since I had a very negative networth and was running out of options) was necessary or at least helpful in my money transformation.
I worry about my own future kids since I’m not sure how to instill these lessons without having them hit their own bottom. We don’t have kids yet, but we’re already saving for their college education, and we’ll probably have around $500K by the time the first one’s born.
Lot’s to ponder.
My husband and I grew up first world American poor but had families who valued education. We do worry about teaching our upper middle class kids that they need to work for a living.
Some kids are hard wired to be workers and un-entitled. Others are going to sit around waiting for things to be given to them. Obviously, it’s harder to do that when your parents don’t have anything to give you. However, I have seen some of the biggest couch potatoes from wealthy families get off their duffs because they *want* what their wealthy parents won’t just hand over to them while the poorer couch potatoes – who live in questionable neighborhoods – sit on their mothers’ couches and play video games. The rich couch potatoes have tasted the sweet life and they want more, whether it’s the latest video game, travel, a nice car, or merely to live in a nice, safe neighborhood. Because their parents have been able to incentivize them – i.e. “you do x and that’ll earn you y” these richer kids have come to understand that hard work brings things in a way that the poorer couch potatoes don’t.
To be quite honest, I think my husband and I are genetically predisposed to be couch potatoes. However, we were not given material comforts by our parents and it was clear if we didn’t start earning our own way we would continue to go without. Today, the poorer side of the family has not done that to their children – maybe their kids don’t have the latest and greatest, but the kids know in a year or two their parents will get them what they want from a yard sale or a cousin’s castoff. And if a true couch potato knows something’s coming whether he works or not, he’ll just wait until he can have it for free.
Been reading GRS for years and generally enjoy the content, but this article left me a bit perplexed.
Merely asking the question “Can privileged children learn the tenets of personal finance” romanticizes poverty because you’re beginning from a skeptical standpoint and asking for evidence/advice/proof to the contrary. The question itself, and many of the assumptions made in the first half of the article, do not state openly but still inherently buy into the romantic notion that the poor and impoverished will generally be better with their money than those well off.
Anecdotal evidence aside, many people who are well off got well off and stay well off due to financial intelligence. Because of what we see in the media and our own prejudices growing up, we tend to assume that anyone well off got lucky, inherited the money, or got it through some other easy means. The reality is that most of them worked hard just like we do and handled their money wisely, just like we do.
How children handle money when grown depends largely on the effort their parents take to teach the value of money and hard work, irrespective of their parents’ financial status. Environment and life experiences certainly play a part in that, too. However, most habits, viewpoints, and mindsets we take into adulthood have a very strong foundation in how we were raised.
And for the record, I came from a middle class background, had an allowance, then a job, put myself through college on scholarships, etc etc.
I think so much of it depends on how much of a mental safety net you have, whether or not your parents have a lot of money.
I grew up not insanely poor, but definitely lower middle class with parents who never really had a whole lot of job stability (and still don’t) and for whom savings was not really a concept that got much attention. In contrast, Mr. PoP’s parents had nice stable tenured state jobs, tons of savings, and were decidedly upper middle class for his area. Both of our families have one sibling who has “failed to launch”, and this is the sibling who was always babied. One still lives at home, and the other gets monetary help from the parents almost every month because he doesn’t want to learn how to live within his means.
I guess I have hope for our (possible) future kids – that as long as we don’t baby them, we can be financially secure and still raise responsible hardworking members of society.
I agree with you. Here’s an anecdote from our family. My sister in law borders on poor while we are upper middle class. One Saturday morning she was yard sale-ing in our neighborhood and stopped in to say hi. She informed us that one of her sons had dropped out of college and three months later still hadn’t gotten a job. My husband told her he couldn’t believe she was putting up with that. She asked my husband what he would do. Without a moment’s hesitation, he responded, “I’d kick his ass to the curb. He can go to school, get a job, or get the hell out.” My sister in law was horrified by my husband’s response. Four years later, that kid is still living with his mother and he still does not have a steady job.
I wonder what mental problems he has that have gone undiagnosed .
Most healthy adults do NOT want to live with mommy and daddy once they are adults, especially males. If you’re a healthy adult male, you’ll naturally want to be *out* of your parent’s house, with a job and a place of your own. Face it, any potential dates are not going to be impressed if you’re 25, jobless and living with your parents.
Which means there is a high probability that he has some sort of disorder that no one bothered to check into, and just wrote the kid off as lazy. Of course, I’m assuming, just based on your short story, but I’d love to hear to more. So many people with learning/mental disorders get swept under the rug and written off without ever being diagnosed.
No question our nephew is mentally ill – he suffers from an anxiety disorder and OCD. The question for my husband and me is how much of this kid’s mental illness was exacerbated by coddling parents and/or used as an excuse to baby him. They also have not forced him into therapy. I’m reluctant to judge other people’s parenting because I don’t want someone questioning my own, but this is one of those rare times where I can say with certainty that we would have taken a completely different approach.
So you are aware of his problems.
Well, “kicking his ass to the curb” probably wouldn’t work. He’d just end up another homeless statistic.
Being homeless is something I’m terrified of, personally. I have several mental disorders too (including severe anxiety), and have been on a variety of medications to try treat them. Still working on finding the right mix. I’ve also been jobless for 7 years now after a failed graphic design career and am living with parents (although I have gone back to school at this point). I’m also middle-aged.
If my parents had shown tough love and “kicked my ass to the curb”, I can assure you, I’d be either homeless or dead by now. I just don’t have the capacity to function normally in society, and need a lot of help to do so. So don’t be so quick to think that your method would have been the correct one. It’s so hard to know exactly what to do with dependent family members who have mental illnesses. Science just hasn’t made very good advances yet in the area of highly-functioning mentally ill people. (or in the area for low-functioning ones either).
Or join the military.
Your experience with the kid is VERY familiar to me since I grew up with a single mom on the verge of poverty, but went to an elite private boarding school on scholarship. Me and the other regular/poor/scholarship/whatever-you-want-to-call-it kids ended up gravitating towards one another because most of the girls at the school were very rich and they just had a different way of looking at the world, a different set of values. They would spend their Friday evening shopping via J.Crew catalog and get mountains of packages each week, while I was scrounging for enough quarters to do laundry and was truly excited to get a care package with pop tarts in it. Don’t get me wrong, it was a wonderful experience and I loved it there, but frequently I would have similiar experiences as you did. I was asked by a girl “oh are you going on such and such skiing trip”, and I said, “No, I can’t really afford it”, the response I got was a purely confused look. “What you mean…. you can’t ‘afford’ it?” Some of these girls have crashed and burned when meeting reality, some have continued living a cushy lifestyle and probably don’t understand “not enough” to this day.
My parents got most stuff right. Growing up we started out as working class (Dad working as a waiter), which as time went on maybe hit upper middle class (moved to restaurant manager and then a series of his own restaurants). We moved from an apartment in the inner city, to a duplex, to a free standing nice home, but my parents were not ostentatious in their purchases, and we all had to work at my Dad’s restaurants during the summer, when often other families were going on nice vacations. I always knew at some point I would have to be self-sufficient, and remember one time in college taking on tutoring jobs so I could pay for my GRE fee because my parents wouldn’t pay for it. Unfortunately even the same family can teach different behaviors. While all the rest of the kids were expected to be self-sufficient, my oldest brother, the black sheep, was an exception. No matter how much he would mess up my parents particularly my mother, would bail him out to the point he never learned to take care of himself. Even though I know I’m better off from learning how to stand on my own two feet, the rest of the kids felt a lot of injustice growing up by the disparity of one child getting the vast majority of help and resources to the exclusion of the others. That is one thing I never will do with my children.
I think there are a wide variety of experiences and lessons. Those that grow up poor, some do better at managing money and saving because they don’t want to be poor or because they worried about their next meal as kids. But, I think there are also poor kids who wind up growing up to be spendthrifts because when they have money they want to spend it due to being deprived as kids.
On the other side of the coin, many very privileged children grow up to be smart with money, give to charity and do appreciate the great start given to them by their parents. And there are certainly spoiled kids who never learn to be productive and live on mom, dad or the trust for their whole life.
In my professional life (in my line of work I deal with these people) I see a lot of rich people behaving badly and many of them were trust fund kids. They didn’t have to work, so they didn’t, they didn’t have to get an education, so they didn’t. They live in a bizzaro world where they present themselves as very successful people because the dress the part and drive the part, but when they open their mouth they talk like an uneducated doofus because that is what they are. Most of their marriages end in divorce because most of them were married for their money, they pay out tons in alimony and child support and then they complain that they don’t have enough money to pay their $100,000 Am/Ex bill.
While I am working very hard to attain the kind of money they were given, I have learned through my interactions with these people that trust funds don’t lead to happiness unless you have very strict parents and a very tightly written trust document (to keep the kids in line after the parents are gone).
This article gave me an unpleasant reminder. My family was always very judgmental. We criticized people with money, as if they were greedy and haughty. Of course, that was a teaching of our religion. Materilism was a big no-no. One man was actually talked to by the church elders for having gotten a big promotion and making a “showy display of one’s means of life” by buying a new car for him and his family. He was shamed into selling the car. People with money were “blessed by Satan”. I have gone through a lot of “recovery” after getting out of that religion, but I constantly discover new ways that the beliefs affect me still. I thought after overcoming the counseling against higher education I was free from being affected on a personal finance level. I might have some old ideas of righteous poverty standing in my way.
You don’t need a whole article to figure out whether rich people’s or poor people’s kids do better. It is 100% entirely obvious, and it’s the opposite of the article’s clearly ridiculous proposition. No, seriously, go poll some doctors and engineers for their parents salaries when they were growing up and then do the same for Walmart and gas station clerks. The notion that growing up poor helps you become rich is ridiculous.
Tyler, I wasn’t particularly asking if being poor helps you become rich. You’re right; common sense (and stats) tell us it’s easier to become rich if you grew up rich. But I suppose the question I was posing had less to do with having a ton of money in the bank and more to do with learning the tenets of financial independence and what the effects of having an “impoverished mind-set” are. But perhaps I could’ve made that clearer.
Clearly, in the real world, the effects of an “impoverished mind-set” are usually continuing to live in poverty, just like your parents did. Meanwhile, ask the Kennedys about growing up with rich parents.
We don’t need to wax philosophic on what *might* happen in these situations. We can easily look at the real world and see what *does* happen.
Fun story: for Christmas my sister-in-law and niece were visiting, and I took my niece outside to feed the chickens. I told her we could pick an apple off the neighbor’s tree and feed the chickens. Well, in addition to feeding the chickens, she wanted to eat an apple off the tree herself. I said OK and gave her an apple. I told her she could give the core to the chickens when she was done, and she asked “what’s the core?”
Turns out she didn’t know what an apple core is (she’s 6), because her mom has always sliced her apples for her. But now she does. I don’t think this will have any big impact on her as an adult, sort of like your kid and his ice cream. Kids don’t all learn everything at the same age, but they still learn it. Not knowing something simple as a child is normal, not a sign of some great failure you might have as an adult.
I think that this starts with the parents. Those of ample means have a choice, and it depends on what they feel is best for their children.
They can: A) give their children everything because they don’t want them to ever go wanting. Or B) teach them how to take care of themselves, the value of work and money, and prepare them for independent adulthood.
I’m not going to get into what is right or wrong. Just that wealthy parents have this option. “Poor” parents do not. The frugal lifestyle will be illustrated throughout their children’s lives, likely ingraining frugal values in them into adulthood.
I think Kristin’s story illustrates that point. She was raised “poor”, and she has carried over some of the values of her parents. The other child hadn’t seen that lifestyle because his/her parents went with option A.
I grew up just like that kid – no concept of what money is worth, no concept of “we can’t afford it.” Then I moved out on my own and continued just buying whatever I wanted, paying no attention to whether I could afford it. Only now, I was doing it on credit. Now I’m 35 and digging myself out of that hole. Thank God I read The Total Money Makeover or I don’t know whether I’d have learned my lesson even now.
That said, it’s important to note that most of the kids I went to school with, some of whom grew up much richer than I, are doing just fine, with good jobs and houses and very little debt. I wouldn’t worry too much about money spoiling your kids as long as you teach them the important lessons you’ve learned about financial independence in a way that sticks. Of course, you might still get a kid like me (my parents tried, I just wouldn’t listen). But that could happen no matter how much money you have.
Unfortunately, people who are poor spend their money on frivolous things. Whether you are rich or poor, you still need to learn to save for things you want.
My ex-bf worked through college and took loans, because his parents couldn’t pay. My college was paid for, and I worked a little for spending cash. He said he wouldn’t want to pay for college for his kids since people that had that wasted it. However, I felt extremely indebted, and I feel the obligation to pay it forward to my kids. I got high grades for it, pursued a practical major (though not my parents choice), and finished with no debt (the extra savings to one day be applied to grad school).
As for the boy in the story, he’s a boy and will grow out of it. I’m sure I had the same attitude about money as a child. It doesn’t take long in the real world to learn what money is, but one thing coming from a privileged background does teach you is that it is attainable, tangible, and you have no excuse for not attaining it too.
I grew up middle-class (two frugal teacher parents). My bestfriend grew up poor as dirt. He’s become an IT professional since, has made loads more over his career than I have, but he hasn’t got a penny to his name. He’s as dumb as hell with money. He never had any growing up, so whenever he gets it he doesn’t know what to do with it, so blows it on totally ridiculous things. I watched once in a music store as the manager came down the stairs with a pair of scissors to cut up his credit card. (The cc/cash register actually gave them instructions to destroy the card immediately!)
Yep, makes money, comes from a really poor family, still stupid as hell with it. Money handling and respect for cash must’ve been learned as children at some point.
(As usual, good article Kristin!!)
This comment reflects my experience! Not that I was ever out of control enough to have massive credit card debt.
The people I know who grew up poor (or first world poor, more accurately) – including myself and most of my friends – tend not to have learnt any money management skills whatsoever. I know I didn’t. You either make a conscious choice to change and learn or you end up having massive debt and not understanding why you’re broke all the time.
On the other hand, my partner grew up in a financially stable household and he almost takes it for granted that you should live within your means, avoid debt etc because that’s the behaviour his parents modelled for him.
Ah, a wonderful story.
Someone I know’s daughter recently had her Sweet Sixteen party. 150 people, DJ, photo booth, a “court” of like-dressed friends, a pink limo, a gown, a tiara. It is referred to as the “wedding rehearsal”.
Two Christmases ago, the poor girl had to spend Christmas morning on a plane to their vacation home. It was quite upsetting to her mother that the only flight they could get was for that day.
What will it be for high school graduation? A BMW? Mercedes? Ferrari?
And she is a helicoptered kid – Mom and Dad monitor and handle everything for her.
It pleases me that many young people today are enjoying a better childhood than most of us did. Alas, they are also growing up with no clue as to how to handle adversity. They are going out there with a great sense of entitlement.
And many will crumble at the first hard knock life gives them :/
I think this is one of the best posts I’ve ever read on this blog. Very thought provoking. I do believe that children who don’t have everything handed to them more readily adopt a practical lifestyle. However, I know one example in which a person, the middle child in a family of 11 kids, has kind of gone the opposite way. Maybe because this person didn’t have much of anything while growing up.
I think that your parents’ attitudes and treatment of money teaches you more about financial responsibility (or not) than how much they make.
While we grew up (lower) middle class, my parents were a little embarrassed to discuss money/finances, so we were never really given a chance to learn financial responsibility. My parents always told me they wanted better for me than they have – but figuring out how to do that was all up to me.
Luckily, I became interested in finances on my own in college, so I didn’t make many of the common mistakes (or I stopped myself from getting in too deep). Now, I’m the only even semi-successful child of 4. 1 sibling did not graduate high school, 1 did not go to college, both are living with my mom rent-free. Neither are motivated to be financially responsible, so they just aren’t. While she isn’t a fan of the situation, she lets it happen because she feels like she failed teaching them how to be successful and financially responsible.
I know a lot of rappers and industry people (long story) and many of them grew up excruciatingly poor. When they came into money, some of them just blew it on cars, clothes, etc. I think this was partly because they were young and foolish, partly because they thought their careers would always be hot, and partly because they didn’t know how to handle their finances or have people in their immediate circles who could give them sound advice about managing the money. So they have a lot of regrets now that they are older and have families that they didn’t know how to save or invest.
I agree with most of the posters that growing up with a lot of money can be a problem, as it has been for one of my friends, if the parents spent frivolously or didn’t teach the children how to save.
I know people who also grew up in extreme poverty (though not rappers 🙂 who share this mentality. To many who don’t understand money well or who have never had it, wealth is demonstrated by conspicuous consumption.
I know a man who was a childhood runaway who worked hard to attain middle class status and now he always has the best cell phone and has to have a new car. To him, those items show that he has made it because he went so long without having anything.
You can still have money and provide for your children while teaching them “delayed gratification” and discipline. In my opinion, children definitely need to learn delayed gratification.
Read the book The Road Less Traveled by M. Scott Peck for some insight. Great book 🙂
Very thought-provoking post… my husband and I have discussed this topic a lot since being married. I think it’s important for kids to be aware of money and that having it takes hard work. I think its all about how a kid is parented. A lower income child and be taught to work hard or to expect handouts from those who have more than they do. A high income child can be taught to work hard or to expect handouts from their parents.
I disagree that people who grow up closer to poverty have a better view of how to handle money. I think it all depends on how you are taught and what you see. In many cases families who are wealthier have gotten there by managing their money better.
I grew up in an upper-middle class family with what I like to call a “Great Depression” mentality. My parents struggled in the beginning of their marriage but by the time I was school age my family was probably the most well-off of all of my friends’. Even so, my mom scrimped and saved. Dad drove a 15 year old car and we rarely went on vacation. Large ice cream? Don’t even dream about it, my mom was trying to sneak me in for the kid’s rate at restaurants until I was 16.
My parents talked to me and my sister about money a lot. They opened savings accounts for us and even bought us stock at 5 or 6 to help pay for college. I knew everything that was tax deductible by the time I was in high school. I worked and bought all of my own clothes by babysitting from the time I was 12. Money was always about saving for the future, because we were fortunate to have enough now.
In contrast, my best friend’s family was more lower-middle class. They had a “spend it if you have it mentality” because they never knew if they would be able to afford that new dining room set later. They never thought they had enough to save, so they didn’t. They were afraid of investing, so they didn’t. They planned to rely on the pensions their jobs provided, the same pensions that lost so much value in the recession. Cars were “bought” by taking on debt.
As a result, my friend knows nothing about saving/investing/retirement. His family worked hard but had nothing left to give him for college so now he is in debt. My family paid my education in full so I could start with a clean slate as an adult.
Both of us learned frugality from our families. He because he had to in the present; me because money was about securing your future. What I learned, that he didn’t, were the more high level money management strategies that take you from getting by to living the life you want.
I grew up poor, and I completely understand your mentality. I think very similarly. Actually, all of your points of behavior are mine.
My hubby on the other hand grew up well off. I grew up in a house 1/10 of his house. While he had multiple Christmas presents, we only had a couple small presents. I’m still extremely surprised at how his family celebrates Christmas. While my family only does a small gift exchange (one present at the most), his parents spend so much money. It baffles me.
I’m not sure how to react.
I do feel myself feel a little entitled for growing poor. Is that even the right phrase? I often tell my husband that he doesn’t understand.
He does balance me out though.
I think kids can be taught to be responsible despite having more money. I think that it’s all about the values of your family. I hope that if and when we become parents, I can teach my kids to value the small things, and the big things are not required for happiness. Living a humble life is plenty.
I grew up “old school” middle class: beautiful modest sized home, two cars, “modest” vacations (usually a road trip to LA from northern California to visit family or a week in Yosemite), clothes from modestly priced retailers – you get the picture.
I certainty didn’t get what I wanted outside of what I needed. Everything I had it was determined and decided by my mother. She was frugal in her own way, always had impeccable credit and savings. With that said she never, ever taught us budgeting and what it means to be financially responsible. In her defense, she was never taught by her parents either – she was the type of person that was able to learn on her own with very little outside influences but didn’t know how to teach what she knew. My brother and I on the other hand, its been a uphill climb for us.
I agree with some of the other poster who pointed out that it takes more than simply being poor or rich (or in the middle) to know how to manage money.
I don’t think there’s a personal finance advantage to growing up poor, exactly. I think there is an advantage in not having everything handed to you, regardless of how much your parents make.
Lots of people say, “In retrospect, I was poor growing up, but never realized it at the time.” I bet some wealthy kids had the same experience. They didn’t realize they were rich because their parents lived below their means and didn’t buy them everything they wanted.
When people say they never realized they were poor growing up, I assume they weren’t really that poor or they had a heck of a safety net, like rich grandparents, which really just means they had poor parents but their own childhoods weren’t ones of deprivation. Being poor means bad teeth, seasonally inappropriate clothing, a cold home because you can’t afford heat, etc. Even the most obtuse child generally can figure out he’s poor by the time he’s 12 or so.
Well, not necessarily “poor” as in “below the poverty line,” but let’s say “low income.” For instance, the official poverty line for a family of three is only around $17K, but a family could make quite a bit more and still be struggling.
My dad’s side of the family grew up poor. When they married someone rich, they decided that lifestyle inflation was their path to success.
As a result, I grew up in a middle income household. During that time, my father started having gambling problems. I started realizing this when my mom cannot afford to pay the bills needed to keep the house.
When I came back to my home country to visit my mom’s side of the family, I realized that my mom’s side of the family had a lot of money (one of the wealthy elites in their town) was because they decided to live below their means for decades. I came to a realization that happiness didn’t come from being rich by having money, but being economical, buying what they need, having a support network (family), and being grateful of their possessions.
They own a business that is booming, and by the time I went back home, they inspired me to live frugally. I followed their advice and delayed instant gratification, spend on things that matters to me, save for retirement, or anything else I wanted.
I think it’s true what they say, that a child’s concept of the world is defined by their own home. And if romanticizing your roots helps keep you close to your financial goals, then by all means, don’t change that!
When I was reading about microlending, I was so surprised that over 90% of those in the developing world are able to grow their businesses and thrive. I then thought about a few of my side endeavors and how they really didn’t take off, and how small businesses here fail easily. I talked to a friend about it who said that when you’re in absolute poverty, you have pretty much little choice: you *have* to succeed. Whereas for me, I’m comfortable, don’t really need the side income, so it’s easier for me not to hustle since it doesn’t mean my life.
I’m starting to talk to my three year old about money, first by introducing coins and currency, and I’ve been mentioning how we gave so and so money and in return he gave us this and that item, and vice versa, when I sold something on Craigslist and he asked where the stroller went, I said that the lady gave us money and I gave her the stroller.
Another topic I’ll be discussing with him is that there are valuable things and experiences that don’t require money, such as spending time together at the park or hanging out with a friend.
Being poor doesn’t automatically teach you good finances. There are a lot of poor people who teach their kids poor financial behavior to their kids and this gets handed down generation to generation. There are a lot of well off people who teach their kids good finances. I agree it may be easier to learn the value of the dollar and frugality if you don’t have much versus if you’ve got a lot of money, but I don’t know that this is the general trend at all.
First question – not necessarily. Just because you do or don’t have money doesn’t mean you learn how to budget it. I think learning how to handle your money follows many things parents should teach their children like learning to budget time or other responsibilities. I’d love to see a study on this though!
Second question -There are so many good ways to do this but my top two (having raised financially stable son) are these. 1)Teach them that time = money. For ex. when my son wanted something, even at a young age, I helped him figure out how many hours & min. dad had to work to buy that. As he got older he learned how our family budget worked & actually saw how much went where for needs & what was left to play with – then he helped decide how the play money was spent. 2)Don’t give too much too soon, in other words say no, teach delayed gratification. From a young age I taught my son choices & when he could understand I taught him why. At the grocery store I gave him a price limit on the cereal he chose (because we had to stay in our grocery budget), at a restaurant I’d give him a price limit on what he could order, ect. If he asked why we explained that’s how much money we had budgeted for that activity. There are a lot more things that could be said on this & lots of practical advice online to help you.
Third question – I think it can, it depends on the person. I grew up in a ‘poor’ family (poor for the US, not China!)My family used food banks & ran out of money every month. My mom used to teach me ‘trciks’ for saving fun money from her grocery budget without my dad knowing. My mom was very frugal & made things go a long way but that always bothered me. I’ve been married over 25 yrs & early in our marriage we decided to give each other an allowance so we could each have our own little fun money with no guilt. It was really good for me for small things but to this day I still take months to buy shoes or clothes because I feel guilty for spending the money on myself – even though it’s budgeted for that. I think it’s part of the way I grew up & part of my personality – it’s not a bad thing to feel guilty to spend really.
With my children, I hope to teach good financial habits as many have already mentioned: having them work for things they want, teaching the value of saving and investing, etc. We are saving for their college educations, but they will not know this “safety net” is there. My husband and I want them to figure out on their own how they will pay for college – then successfully complete their coursework – and only then, we will discuss repayment of their loans or compensating them for what they may have already spent.
I think it’s also important to teach their position in the world, and gratitude for that, through exposure to people who are not so fortunate. My children are young, but we try to volunteer with them as often as possible. I hope that getting to know our homeless neighbors, for instance, will teach them how lucky we are in comparison, and how with one bad roll of the dice, that could be us (“So you see children, we have to save our extra money in case something happens and we really need it.”)
But these are just my hopes. I’ll let you know how they turn out in 20 years! 🙂
Does an impoverished mind-set keep you from enjoying the freedom of financial independence? I am torn about this question. I’ll just say this: now that I’m in a financially secure place, I have allowed myself to relish it TOO much, the opposite of what you’ve done. And, my choices have made me more financially INsecure as a result. Personally, I am only really good about saving and budgeting when I NEED to be. So, I think it’s important to treat yourself once in a while if you can, but your impoverished mindset seems much better than the alternative!
I’ve seen rich kids with very good financial literacy and rick kids with very poor financial literacy. I’ve seen poor kids with very good financial literacy and poor kids with very poor financial literacy. The main factor is not the amount of wealth in the family *but rather the amount of time and effort the parents took to teach their children about financial matters*. That, above all, makes the difference.
Assuming two young people whose parents took the same amount of trouble to teach them, the rich kid will (in my experience) be better off because chances are his parents had lots of money because they were at least decent at acquiring it and managing it. A poor family, on the other hand, even if they are excellent at being frugal, may simply not have any experience to pass on at other types of money-management things. If nobody in the family has ever owned a home, for example, what are they going to be able to teach you about mortgages? I had a friend who got into trouble in something like that–unlike the rest of her family, she was working a professional job instead of several part-time minimum-wage jobs, and had no clue how to handle that extra income and little idea how to dress and network in her new income/class bracket to advance in her field. This caused many problems for her.
On the other hand, if your parents assume you’ll never need to know about finances because the money will always be there, or they think that it’s obvious (because it is to them) and you’re smart so you can figure it out, well, that also causes many problems.
Ok, I just want to state at the outset that I’m spending exactly 5 minutes responding to this great, provocative post because, although I’ve been up since 5am writing a report to hand it in on deadline, I still have work to do and I must get it done. I must deliver. I must make my customers happy.
So works the brain of a PhD (Poor, Hungry, Driven).
So, to make it quick, I do think people who have had to either sink or swim learn to swim really well–and quickly.
I also think that one of the psychological downsides is that you never feel entitled to the “large ice cream cone” of life. At least I don’t.
I’d like to say more, but I’ve used up my five minutes. Got to get back to work.
But great post!
Boy, this has spawned a lot of discussion. For that, good job, Kristin!
I’ve often admired many new (middle class) immigrants’ flexibility with money. Work hard, be generous with your time in your community and be financially mobile. Many adapt to living well but can also adjust easily (i.e., no whining) to living well below their means when necessary. Something I need reminding on occasion.
Growing up in a small town in India. My family was middle-middle class, so I always had funds for education/books but never for vacation etc. In my 8th grade I meet a boy his dad was one of the richest person in town but he still used to come to school on his bycycle (unlike other rich kids who would come on MotorBike or car). I once asked him why he comes on a cycle. He replied…”my dad worked hard to make all the money…he does not think I should get it any easy”. Years later I meet him again….He runs his father’s business now and his son is learning the same lesson from him.
Rich or poor, role of parents cannot be ignored.
Are privileged kids at a disadvantage when it comes to learning the lessons of financial independence? I think it depends on how their parents brought them up. If these privileged kids were spoiled and given everything they ask for, definitely they will not learn the value of money, savings, and spending. However, if their parents explained to them how money is earned and how it should be spent, I think they will understand what financial independence means.
Kristen…I love your articles. They are so thought provoking that I find it difficult to believe you are still a “young person.” You need a bigger audience.
You can grow up in privilege or poverty. If you are never taught the basics of personal finance, you’re going to be at a disadvantage.
Rich people can spend themselves into debt just as quickly as poor people – they just buy more expensive stuff.
You can grow up rich or poor or middle class like me and still learn about hard work.
You can grow up rich or poor or middle class and think that you are ENTITLED to whatever you want without working for it. It is all in how you are raised.
Did your parents teach you to work hard?
Did your parents teach you to take what you want even if you don’t deserve it and even if it hurts someone else?
Did your parents work hard or were they takers? Welfare cheats or work place bullies or slum landlords or thieves. Children learn by example. What did you learn from your parents?
Growing up in the midwest taught us things like shoveling snow or cutting grass to make our money. We never had money given to us except for birthdays and Christmas time so we had to work to make that money to save up to buy a car and for insurance. I think growing up with your parents having money has a huge impact on kids and how they value money or even understand the mechanics of it. We had to learn the hard way, most kids now seem to expect it and actually have a harder time growing up and getting out on their own. Why move out when things are so good at home. So yes, I think if a kid is from a richer home they should expect them to work for things and limit the material items so when someday they grow up and do not have mom and dads money they will understand how to make a buck on their own.
I think that parents who have a great deal of money certainly have a big challenge in teaching their children regarding finances and responsibility. However, this is certainly possible. For example, in the case of the child you baby-sat, just because his parents had the means to give him whatever he wanted doesn’t mean that they had to. They certainly could have given him a budget and taught him at a young age about making financial choices. However, I think many families that have a great deal of money choose the easy route, and simply give their children their desires because they can, rather than teaching their children responsibility.
I didn’t grow up in a family with a lot of money, and certainly learned to be financially responsible because of it. I have a doctorate, and my parents did not save any money for my education. There have been times when I wished that they would have set up a college fund for me. Yet, I don’t know that I would value my education as much as I do if my parents had paid for it. I do recall that in college, those of us who had to pay for college ourselves certainly put a lot more effort into our studies than many of the students whose parents were paying their way. Perhaps I’m a romanticizer as well?
I wrote a post for Midlife Finance that talks about this issue:
http://midlifefinance.com/2012/12/letter-to-our-children/
How you grew up — and how your parents responded to those times — affects you. You can’t help that. What you CAN do is realize why you’re feeling that way…and deal with it. You often can’t directly change a situation (or especially other people) — but you can change how you deal with it. And more often than not, your attitude can actually have the long-term effect you were wishing for, all along!
Sounds a little Miss Suzy Sunshine, but I’ve seen it happen, over and over.
My thing is that a lot of the things that we think we need we don’t actually need. For example, my computer is old but it works very well. Furthermore, if new computers only do the same thing that my computer does why would I throw money away on a new one? This makes no sense. If you stop spending your money on things you really don’t need you can do amazing things. Like I’m about to buy my first house cash, which of course is usually unheard of. But, instead of a new computer that does the same thing I just kept my money and invested it.
Another example is the new Iphone. My phone is old and the screen is cracked so I went to get a new one. So, I asked them what do these new phones do and he told me they do all the same things that my phone does and nothing new. They’re just a little bit faster. Why would I throw my money away for nothing, when again they do the same thing.
Same thing with the new Iphone, I hear everybody saying they need to buy it but, again other than being a little longer and a little faster it does the acsact same thing as the old iphone. Sometimes I just want to say come on people.
In response to this question you asked:
“How do I go about teaching my children the importance of finance, responsibility and self-sufficiency when I plan to give them a safety net?”
I believe that you can provide a safety net for your children without telling them – at least until they are young adults (and no longer a financial dependent of yours). Ideally by then (because it would be too late otherwise) you will have already taught them ‘stick-to-it-iveness’ and ‘perseverance’ and any other lesson you wanted them to learn.
For example, make your children ‘earn’ their spending money – whatever ‘earn’ means to you. I’ve seen ‘earn’ mean doing chores and helping around the house. I’ve also seen it mean getting good grades; and I’ve read about a dad who only paid their children to read books – period. After all, they were expected to get good grades and do their chores – rewarding them for what he expected them to already do seemed counter-intuitive. And the knowledge, language skills and worldliness they learned from reading books of all kinds is irreplaceable in life.
As they are growing up – teach them the pride of a job well done, and that the consequences of not doing so aren’t always just monetary (privileges taken away works very well when done right), seems wise to me. As they are growing up, teach them that if they want something (a new video game, stylish shoes, a popular jacket, etc) they need to spend their own money on it – money they ‘earned’ from you and money that they received from other family members as gifts throughout the year can really add up for a young’un. I have found that when I didn’t offer to buy my son what he wanted (video games are the worst), and instead told him that if he really wanted it then he could use his own money on it – a strange thing happened…more than half of the time he decided he didn’t want/need it that bad. That still cracks me up!
Most importantly, in preparation for the gift of your safety net, teach them that every time they get money, they should divide it four ways: invest some, save some, donate some, and put some in a ‘free to spend’ bucket. That’s what we do in this house. This way, they will understand the difference between those 4 choices and will learn that they are all equally important — when you get a windfall (an extra big birthday check from grandma for a milestone birthday, for example) you will have already taught them what to do with it, while they were still malleable in your home.
When the time is right, as they are exiting your house (moving into their own apartment or home, going out of state for college, getting married, going into the military), tell them that you have worked hard and saved and that you wanted to provide for them, but you didn’t want it to be a crutch that would keep them from learning how to handle money. You wanted to teach them the financial lessons of responsibility, long-term and short-term investing and charitable giving. And that the rest is what you get to spend. It will be second nature to them. They will take the safety net and divide it four ways and only be at risk for ‘blowing’ ¼ of it. And if they do blow it, that will be a valuable lesson for them, but one that won’t break the bank, so the speak.
My mom saved some unknown amount for my college education. I paid for my own car, insurance, phone, books, groceries, etc and was given free rent at home in exchange for going to school. I transferred a lot of community college credits and so my education came in $10k under budget. Here is what my mom did: first made sure that I had health insurance (we met with the agent together, my first employer didn’t provide a plan). Second, we met with a financial advisor and we opened three accounts with the $10k of college funds that remained: 1/4 went into a Roth IRA, 1/4 went into a traditional IRA, and half went to mutual funds. Then she said, I’m no longer your emergency fund, this is your emergency fund, you are on your own now. The meeting with the advisor was pivotal because he was an new, neutral voice and gave sage advice. He told me to read D. Bach’s “Smart Women Finish Rich” (which I did), and gave me some advice on thinking about how to negotiate and think about my salary throughout my career.
Speaking from personal observations, I think it’s confirmation bias that makes people think that poor people have better financial literacy. You hear about people who started out poor and then overcame (which requires learning financial literacy at some point), because it makes a good story. Also, those people are more likely to feel like they’ve accomplished something, and therefore go around telling everyone else about it.
What you don’t hear about are poor people with terrible financial literacy (and believe me, there are probably just as many or more of those than the opposite), or more wealthy people with great financial literacy (there are plenty of those, too). Neither of those situations makes a good story. 🙂
I believe growing up poor played a major influence in my passionate focus on achieving financial independence. It caused me to be more deliberate with my career and savings goals. I do worry about whether or not my own children will have the same drive.
How did we ever get to this point? I’m teaching my 16-year old to focus on the things that matter most in life and to identify the things which matter more than money. That said, I’m also teaching her that it’s OK to be rich.
– Mark
I definitely have experienced the impoverished mindset keeping me from enjoying financial freedom. It makes it feel nicer to feel like you have earned what you get. In our brains, our reward system is probably still wired the same way that it learned to be wired during our childhood. It is hard to change that, so that’s why we experience being held back when we don’t need to be.
It can definitely be helpful, like you mentioned when paying off student debt. For me it is helpful because I have just moved and started graduate school again, and will be living on a smaller income than before. I think I’ll try to make small concessions along the way though.
It absolutely depends on the family dynamics. You don’t have to be poor to learn the value of money. Parents have a responsibility to teach this to their kids. It will lead to more grateful adults. And, having well-adjusted (not entitled) adults is insurance for our future.
Poverty is relative. I had a similar experince growing up and feeling poor but virtually everyone that feels poor in the west is really well off. If you have time watch http://www.ted.com/talks/hans_rosling_reveals_new_insights_on_poverty.html
Most people in the world live on less than $10 a day so I now feel blessed that we were so “rich”. Once you realize that what is the difference between one rich and more rich.
i think it depends how “poor”…because too poor in this country often means people were often raised to resent those with money while at the same time enjoyng the handout afforded them from the government. It too breeds a sense of entitlement and therefor lack in responsibility and hard work. Its a fine line.
I don’t quite agree with the author. I grew up in a well-to-do household. I realized early in life that money(as in chasing the almighty dollar) wasn’t everything. I think I grew up to appreciate having money to spend on really important things. I intentionally left home at 18 and moved 800 miles away. I wasn’t enamoured with the lack of love and attention that I received as a child. Their (‘rents) answer to “love” was to throw some cash at me and tell me to go to the mall. I figured out how to go my own way and make a living on my own. – no college.
I’m agree with amanda! 😉