9 ms·

The Money Letter That Every Parent Should Write

104 points by pavornyoh 10y ago

thesumofall 10y ago
Never heard about the tradition of the "Money Talk" and never got one either. Feel like it is much more worthwhile to teach kids critical and independent thinking rather than trying to teach them principles ("invest in index funds") that might (or might not) be all that useful a couple of years down the road.
- pilom 10y ago
  You know what I wish my parents had taken the time to teach me? How credit cards work, how student loans work, and why I should max my 401k. Yes all of those things could change with legislation, but I'd be much much better off knowing those 3 things when I graduated high school than when I finally figured them out years after graduating college.
  - MrFoof 10y ago
    I never got much of a talk, yet every time I did, I questioned my parents' rationale and savvy. It was simultaneously both an epiphany and a dark moment when in your early teenage years you realize you are unquestionably smarter than your parents. Here is what I was told: * The value of your home doubles about every 7 years. I was told this in 1994. I then asked if my father's salary doubled every 7 years. I was immediately grounded and sent to my room. * I was told to, without question, borrow money for the best college I could. When I asked on how I would pay that back, the question was dodged. * How much money to save? Never came up. 401K? My parents didn't have one. Credit card interest? I was told to get it as low as I could -- but never told to avoid it. * We always seemed to buy new cars. We had a basement full of junk. Seemed to be a nice setup for a guy working at a landfill and a stay at home mom in a city that had been in non-stop decline since the end of World War II. I ended up going against my parents' advice. Something that got me kicked out of the house, for refusing to borrow 150% of their homes' value (I got a scholarship, but far from a free ride) with my own future money I hadn't yet earned, to attend Carnegie Mellon (and instead taking a job to pay for state school, which I ended up leaving after 3 semesters). When the dot-com bubble was about to burst. Result? At age 22 I moved back in with my parents. Not because I needed help, but because they tapped their savings after Dad was unemployed for 6 months, despite unemployment insurance, and desperately needed help (and I wasn't giving them a handout while also renting my own apartment). I was the only person in the immediate family that had a decent job. This was exasperated by the fact they took a huge HELOC (at 10.5%) to help my sister pay to attend Cornell, an offer that wasn't extended to me, but was now burying them alive. They had to help my sister because she dropped BioChem for Psych, which for 2 years hadn't yet landed her anything better than working at a Hollywood Video store. I ended up giving them the third degree. Their books I forced open. So much credit card debt (nothing insane, but significant, and lots paid in interest). So much garbage. So much useless crap. ZERO ever saved in a 401K (it wasn't until 7 years ago that I forced my father's hand on contributing to one). Virtually no savings to draw on. Never mind the extreme animosity considering that I was repaying part of my sister's Ivy League schooling, in addition to my parents' primary mortgage (not paid off after 32 years), and their health insurance. Crazy thing is, they were far from the biggest financial basket cases in the neighborhood.
    - seanp2k2 10y ago
      I grew up in a similar situation, though not as dire. I definitely had to figure this stuff out for myself, and because of my own lack of research combined with memories of when my father basically lost what they had called my college fund picking stocks in the 90s (he thought things like Ricochet and wireless ISPs were the future...thanks dad, maybe 20 years early with the wrong players in the wrong country), I ended up not recognizing a great options opportunity at my company and contributing nothing to it for 2 years before our stock price increased roughly 15x (basically, I would have been a millionaire like some my other coworkers now are). We also had the "houses are always a good investment" bit of advice, despite living in a much smaller house in a much crappier town than we could afford. They're currently back at about mid-90s levels value wise, and my family did a horrible job of maintaining our home, so the value is actually less now. This covers basically what happened: http://infographics.economist.com/2015/uscitieshpi_11_2015/?n=21011894/2014/02/daily-chart-18&w=595 http://infographics.economist.com/2015/uscitieshpi_11_2015/?... Needless to say, getting out a few years back was the best decision I could have made for my life and career in tech. If you're a parent considering writing one of these letters, how can you fact-check yourself to ensure that you're not giving your children a huge disadvantage with terrible advice? I personally learned a lot from Investopedia and from messing around with Bitcoin in the early days (another opportunity where I could have made tens of thousands of dollars had I hung onto the 20BTC or so I had mined instead of selling them for $12/btc, happy to have paid for a new GPU I got just for the task).
      - lostlogin 10y ago
        > I ended up not recognizing a great options opportunity at my company and contributing nothing to it for 2 years before our stock price increased roughly 15x (basically, I would have been a millionaire like some my other coworkers now are). I'm unclear - is this your parents' fault?
        phkahler 10y ago
        >> I'm unclear - is this your parents' fault? No, it's hindsight and regret. It's funny because it would be similar to picking that stock, yet the same poster says his parents lost a lot by picking stocks so apparently that's a bad idea. It's easy to get confused about that when "you worked there" as if that automatically should have given you insider information about a 15x increase in the stock price. No, picking individual stocks is not usually a good idea and Enron taught the lesson about investing in your employer - if they go down you have no income and no savings.
- chao- 10y ago
  I have also never heard of nor received such a talk. I do, however, wish I had been given one.
- cloudjacker 10y ago
  "buy real estate no matter where it is located it doesn't matter if there is no actual supply and demand constraint in our vast suburb in comparison to a city on an island or peninsula" the truth is that your parents don't know anything about economics and investing, they are simply people that had children
- slavik81 10y ago
  I never got the money talk. It was just a part of conversations. Me: "People sure have a lot of stuff these days. These self-storage places are huge." Dad: "Yeah. I figured it was a growing industry, so invested in one back ten years ago. The company made a lot of money, but management were a bunch of crooks. They spent all the revenue on overpriced purchases from their friends and family. No matter how good the fundamentals, you can't win if you're dealing with crooks."
- mmagin 10y ago
  Yeah. I think it could be a little more concrete than that. First, that there's a lot of cultural baggage around money, and it's important to try to know how that's effecting your decisions. Second, that all the sellers of financial products/services are trying to sell you something, they're no more altruistic than a used-car salesman.
- erichdongubler 10y ago
  Well...if they're telling you to do something specific, wouldn't that stop being a "principle"?
em3rgent0rdr 10y ago
How about teaching in small doses at regular intervals throughout their growing up. Or give them tools to learn by themselves.
- vlunkr 10y ago
  Couldn't agree more. Kids learn to handle money from their parents behavior, for good or bad. A single letter can't have the same impact that years of example and teaching can.
- n72 10y ago
  The scary thing is that banks actually sponsor investing games to be taught in schools, encouraging crappy habits like stock picking and trusting your gut and such.
  - tominous 10y ago
    We had a yearly competition like that at school. The "winner" was always someone who put all their money in one penny stock and got lucky. A better approach is to reward the portfolio with the highest Sharpe ratio, but even that is flawed because it ignores systemic risk and confuses historical volatility with actual risk. Anyway, these games teach nothing about the essential habits of delaying gratification and living within your means. Those habits are far more likely to make you rich (and keep you rich) than any particular investment strategy.
sandworm101 10y ago
A good letter if you are a middle-class household without any real problems. But that american dream isn't applicable to everyone. I'd write a very different letter for a family struggling with one or more dependant/disabled family members. There, conventional saving can be difficult but also dangerous. A big pile of money or other assets can too easily be attached or lost to a horrible situation. I'd also write a very different letter for wealthy families. For them, asset protection is far more important than savings. They often spend more energy dissociating themselves from their wealth via trusts and other tax-efficient games than they do actually building savings.
- underwater 10y ago
  I think it's less about providing bulletproof advice and about reflecting on your own experiences. The children would have experienced the outcomes most of what the letter describes, it's just filling in the blanks. Most people see their own upbringing as an ideal to follow so this is giving a rule book on how to do that.
- caseysoftware 10y ago
  Since most of these seem to be parents or grandparents letters to their children or grandchildren, they're not supposed to be all-weather advice. If you have kids, you understand the morals and priorities that you attempted to raise them with, therefore you will speak to that shared understanding. If you're trying to say "different people in different situations have different requirements"... Yes, we know that. And?
  - Dylan16807 10y ago
    The title says "every parent". Explaining why the advice needs to drastically change for certain situations is quite helpful. You should not be so dismissive.
    - nedwin 10y ago
      If you read the template they link to you would see that it's really a blank slate - more a placeholder for the conversation every parent needs to have with their children around money, relevant to that families reality.
rectang 10y ago
"Dear kid: The 'American Dream' is a myth. Its purpose is to flatter the rich that they are virtuous."
ericfrenkiel 10y ago
A modern - and superior - option would be a mobile application that could provide ongoing and reinforced instruction to the child. As a millennial, we're probably the last generation to learn how to write a letter in elementary school (as well as how to use the Dewey Decimal system to find a book in library), yet even I find the concept of writing a letter silly and more about nostalgia for the parent than the child who will probably wonder why you just didn't use email or IM. After reading this article, I'd rather have the couple minutes back in my life than trying to wonder why applying archaic communication to perennial concepts suddenly makes it relevant for the NY Times to cover.
- pilsetnieks 10y ago
  > A modern - and superior - option would be a mobile application that could provide ongoing and reinforced instruction to the child. Reminds me of the Young Lady's Illustrated Primer of Neal Stephenson's Diamond Age.
  - angersock 10y ago
    And now imagine you're the company providing that, including very subtle advertising! So much profits. :)
    - nitrogen 10y ago
      Isn't that the approximate definition of Disney?
- chucksmash 10y ago
  > I find the concept of writing a letter silly and more about nostalgia for the parent than the child who will probably wonder why you just didn't use email or IM. Unless you forget to log into your account with the important emails for N days and GMail/Hotmail/Outlook/Yahoo recycles the account. This actually happened to me before I was in tech (i.e. properly understood the value of backing up my data). After my dad passed I kept an otherwise useless Hotmail account because it contained a lot of email conversations with him. I went to log in one day only to find the account and emails had been deleted. Hard way to learn that particular lesson. TL;DR physical possession of important things isn't an entirely obsolete idea.
n72 10y ago
In the same vein, as a kind of adjunct to my will, I recently put up a memo on github to be given to the beneficiaries and trustees of my estate, when it should come to that. https://github.com/nickgieschen/investingguidelines https://github.com/nickgieschen/investingguidelines Feedback welcome.
- jbigelow76 10y ago
  Sincerely, good on you for making sure you have your estate in order, so many don't; but I sure as hell hope I outlive github :)
- hluska 10y ago
  I have two pieces of feedback. 1.) The letter itself is excellent and full of great advice. 2.) I especially love that you open it up with "Hello from beyond the grave. Nice work - you've not only convinced me to write my own similar letter, but you've also given me a great template to follow. Thanks!
a_small_island 10y ago
So she kept a letter and ended up writing a book about it? What if the letter was just made up so she could write a book?
- geerlingguy 10y ago
  Sounds a wee bit like 'Rich Dad, Poor Dad'. Probably not helpful to someone who understands personal finance reasonably well, and wants to pass on that knowledge to their heirs... but that said, don't throw out the baby with the bathwater—all of these self-help-with-a-little-finance books are better than nothing, since most people (at least in the US) have little or no financial education.
- seanp2k2 10y ago
  I was wondering the same and would have appreciated if the piece was advocating for personal finance to be taught as part of a mandatory high school curriculum.
Zelmor 10y ago
I do double-bookkeeping on every expense in GnuCash. One of the best decisions I did in my 20s was not to go to bed without hitting in those couple numbers into the computer. Elliminated a lot of stress in my life, and made me more savings oriented. My parents never talked to me about money. Reading The Richest Man in Babylon did the magic instead. Check it out, even if just the wiki article. It is worth its weight in gold-pressed latinum.
13of40 10y ago
Huh- I clicked that with a little sense of doom that it would just be a list of ways I've screwed myself financially. Turns out I've been doing most of what's on the list.
m-i-l 10y ago
In my case I did see good examples set by my parents - although their frugality was a little too severe for my liking (they had come from poor backgrounds and grown up during wartime rationing), they did have plenty of good advice like never borrowing money except where doing so can generate a greater return than the debt (e.g. often a mortgage, or making the most of interest free credit for things you have money for and have to buy anyway). But there were some things that they didn't know about, because for example their generation didn't buy stocks and shares, and had a pension provided by the state. So there are many things I've had to learn the hard way, in some cases too late to get the most benefit. For example, I bought a lot of BP shares on 15 April 2010. That was 5 days before Deepwater Horizon, which not even the world's best financial experts could have predicted. After decades of investing in individual stocks that's when I finally realised that investing in individual stocks is too much of a gamble, and began investing in things like index trackers instead. I've actually been making notes over the years, initially to help crystallise what I've learned in my mind, but possibly also pass on to my children. It's things I'd have liked to have heard from a trusted source myself a long time ago. So while I hadn't heard of the practice of either a money talk or a money letter, I might consider it now. Judging by the other comments I might be one of the few people here who thinks this is a good idea. But it would be alongside the usual practising what you preach, given that the best way to teach is by example, and that education is continuous.
ktzar 10y ago
In most EU countries the letter you'd need to write is very different since, as long as you have a decent job, you'll get a decent pension which will allow you to live comfortably as long as you own property by the time you retire. Reading some of those letters made me realise how different risks families have and take in the US and the EU.
- deleted 10y ago
  [deleted]
- sheepleherd 10y ago
  These things have changed dramatically in the last couple generations, in Europe and in the US, and Asia. I would caution you against thinking that things will stay as they are. Hell, I'd caution you against thinking things actually are the way they seem to be.
- thesimon 10y ago
  > you'll get a decent pension which will allow you to live comfortably Assuming the state pension system will still be running by then and won't be totally broken due to birth rates < 2. At least in countries such as Germany they are currently facing issues because of the low amount of young payers in the next few decades. And politicians are just ignoring this to get votes from the mostly elderly population (recently in Germany: pension raise of >5% while inflation is at almost 0%). Sorry, but I think depending on the pensions in the EU is waay to risky. It'll probably fail like a ponzi scheme in few decades. I guess US-citizens are actually better off, because they have more money to save on their own.
eeeeeeeeeeeee 10y ago
I've always been curious about how best to approach this with children. My parents hid all their money problems from us because they didn't want to freak us out. On one hand, I respect this discipline. On the other hand, I feel it allows kids to grow up without knowing how important it is to budget. I think I would rather know the truth, even if it freaked me out because it allows kids to have a distorted view of money and there will be a huge wakeup call when they become an adult.
cmurf 10y ago
I think more than anything right now, the advice to give is how to avoid debt. Savings is certainly important, but increasingly a luxury, as friends still have school debt even as they contemplate having kids. And then think it's normal their kids will have school debt too. School debt is not normal. That used to be for only the classic professions: teacher, lawyer, doctor. College was either paid for by family, by grants, or you worked your ass off but had no debt after the undergraduate degree. Now everyone thinks debt is sane. If I were a parent, I'd plot with the kid how bankruptcy is part of their normal college education. Not debt.
- SolaceQuantum 10y ago
  As far as I understand, it is very difficult to clear student loan debt via bankruptcy.
  - guroot 10y ago
    I think the parent meant bankruptcy as in not having any money for anything in your college years. You are correct Student loan debt can not be discharged in bankruptcy.
  - Clubber 10y ago
    It is. People came up with the same plan. I believe it was popular with lawyers, but I could be mistaken. Get your degree, file for bankruptcy. Since they can't take your degree away and you have no collateral, there wasn't much they could do. The inability to relieve debt through bankruptcy is a result of that scam.
    - lawpoop 10y ago
      Yes, it was doctors and lawyers. Get out of school, declare banktupcy on $100+k of debt (abnormal at the time except for those degrees) and then in 7 years, start over with all the money you saved as a Junior doctor/lawyer.
- houselouse1 10y ago
  We gave our kids the same amount of money toward school. One went to community college, graduated basically debt free. The other went to a brand name private school and has taken on a painful amount of debt. The difficult advice I would offer is this: If you are not a top X% student, and the only way for you to pay for your education is to take on debt, you are making a mistake. Full stop. Find a cheaper school. Find another way, work part time and go to school part time. See if your church/mosque/community group/etc will give you even $500/semester toward school. Live at home or with a relative. If you still get gifts for Christmas, ask for money instead and put that toward books for Spring semester. Stop eating out, learn to make your own food, the meals on campus are too expensive. Find something that you can buy in bulk and sell one at a time on ebay. And of course, the best choice is to go back in time and be born into a wealthy family. You can make it work, but you have to be willing to set aside whatever vision you have about how college should be. Take what is available and make it your own.
srtjstjsj 10y ago
Thin submarine PR advertising for a book, not honest enough to put it in the title.
somethingsimple 10y ago
In the same vein, and my favorite, is Jim Collins' "How I failed my daughter and a simple path to wealth": http://jlcollinsnh.com/2011/06/08/how-i-failed-my-daughter-and-a-simple-path-to-wealth/ http://jlcollinsnh.com/2011/06/08/how-i-failed-my-daughter-a...
fefifofu 10y ago
This article and the book is exactly what's wrong with personal finance education. There is no special wisdom, clever tricks or golden rules in finance. Chicken soup for the soul won't help. Personal finance should be taught as a math problem. Figure out the cost of the lifestyle you want, and work backwards from there. If your fancy house, car, and dinners out cost $100,000 then you can figure out if your choices make sense... does you career choice match up? does taking on school debt make sense? etc. Or if you are older and made these life choices already and make $50,000, your math problem is a bit different. Does the honda or tesla fit? You can very easily see if credit card interest of 20% will help or hurt you achieve your goals/lifestyle if you do the math. None of this generic "avoid debt" or "house are the best investment" (garbage) advice helps and only confuses the matter. I think the only area that has more confusion and bad advice than personal finance is nutrition. In the letter, grandma says "go for a fixed rate mortgage"... what!?
- jpatokal 10y ago
  > You can very easily see if credit card interest of 20% will help or hurt you achieve your goals/lifestyle if you do the math. Is there any scenario where paying 20% interest on credit card debt (or, rather, getting into a scenario that requires that) would help you achieve your financial goals?
  - fwn 10y ago
    Don't know about "financial goals", but goals: If your utility gain from the 20% interest is lower than the utility gain from the instant availability of that money. I can think of various situations where, if there were no better products available, this might end up making sense.
  - sokoloff 10y ago
    Short term bridging of a company (or real estate portfolio). It's not so much the 20% APR that kills you; it's the length of time that you pay it.
- jfaucett 10y ago
  I'm mixed on your views, I agree with your math problem analogy, but I think there is general advice - just as there are general properties of numbers - that can always lead to better financial outcomes if people abide by it. For instance, what I've always done and it has worked very well for me is the following: 1. Maintain constant revenue stream, even if work is part-time or all you have is just an investment paying dividends. 2. Never purchase anything you can't pay for in cash at that moment. 3. Try to save 10% of your income every month - even in low income months. 4. Don't be wasteful and don't blow money on "small crap" you don't need. i.e. junk food, fast food, trinkets, taking unnecessary trips or riding first class, leaving devices/lights on in your house, gym/any memberships or monthly recurring fees you don't absolutely need. 5. Finally, don't purchase things on a whim. I've tried to live by these rules my whole life, learned them from my Dad, and they've worked very well for me. I spend money, but usually only for high quality things I research into for a long time before purchasing, like a piano, a plot of land, tools, etc. I have zero knowledge of actual research into personal or home finance so this example is just my gut intuition based on personal experience, so just view it as a biased anecdotal opinion :)
LoSboccacc 10y ago
you know what? this is utter bullshit. lived by this advice for 30 years or so, stashed a good amount of money, then the storm came, and I lost 90% of it in a very rough year. if I hadn't that, I could have had access to welfare. instead, working hard and saving money put me squarely in the 'have to spend for everything' class, without any benefit. so here's the advice letter I'm gonna write to my gc: hide everything. dodge as much as you can without breaking the letter of the law. go find the most skilled practitioner in tax evasion and have them hide whatever you earn so much you can qualify for welfare, free tuition, college scholarships for low income family for your children etc. being middle class sucks.

104 points by pavornyoh 10y ago

Never heard about the tradition of the "Money Talk" and never got one either. Feel like it is much more worthwhile to teach kids critical and independent thinking rather than trying to teach them principles ("invest in index funds") that might (or might not) be all that useful a couple of years down the road.

pilom 10y ago
You know what I wish my parents had taken the time to teach me? How credit cards work, how student loans work, and why I should max my 401k. Yes all of those things could change with legislation, but I'd be much much better off knowing those 3 things when I graduated high school than when I finally figured them out years after graduating college.
- MrFoof 10y ago
  I never got much of a talk, yet every time I did, I questioned my parents' rationale and savvy. It was simultaneously both an epiphany and a dark moment when in your early teenage years you realize you are unquestionably smarter than your parents. Here is what I was told: * The value of your home doubles about every 7 years. I was told this in 1994. I then asked if my father's salary doubled every 7 years. I was immediately grounded and sent to my room. * I was told to, without question, borrow money for the best college I could. When I asked on how I would pay that back, the question was dodged. * How much money to save? Never came up. 401K? My parents didn't have one. Credit card interest? I was told to get it as low as I could -- but never told to avoid it. * We always seemed to buy new cars. We had a basement full of junk. Seemed to be a nice setup for a guy working at a landfill and a stay at home mom in a city that had been in non-stop decline since the end of World War II. I ended up going against my parents' advice. Something that got me kicked out of the house, for refusing to borrow 150% of their homes' value (I got a scholarship, but far from a free ride) with my own future money I hadn't yet earned, to attend Carnegie Mellon (and instead taking a job to pay for state school, which I ended up leaving after 3 semesters). When the dot-com bubble was about to burst. Result? At age 22 I moved back in with my parents. Not because I needed help, but because they tapped their savings after Dad was unemployed for 6 months, despite unemployment insurance, and desperately needed help (and I wasn't giving them a handout while also renting my own apartment). I was the only person in the immediate family that had a decent job. This was exasperated by the fact they took a huge HELOC (at 10.5%) to help my sister pay to attend Cornell, an offer that wasn't extended to me, but was now burying them alive. They had to help my sister because she dropped BioChem for Psych, which for 2 years hadn't yet landed her anything better than working at a Hollywood Video store. I ended up giving them the third degree. Their books I forced open. So much credit card debt (nothing insane, but significant, and lots paid in interest). So much garbage. So much useless crap. ZERO ever saved in a 401K (it wasn't until 7 years ago that I forced my father's hand on contributing to one). Virtually no savings to draw on. Never mind the extreme animosity considering that I was repaying part of my sister's Ivy League schooling, in addition to my parents' primary mortgage (not paid off after 32 years), and their health insurance. Crazy thing is, they were far from the biggest financial basket cases in the neighborhood.
  - seanp2k2 10y ago
    I grew up in a similar situation, though not as dire. I definitely had to figure this stuff out for myself, and because of my own lack of research combined with memories of when my father basically lost what they had called my college fund picking stocks in the 90s (he thought things like Ricochet and wireless ISPs were the future...thanks dad, maybe 20 years early with the wrong players in the wrong country), I ended up not recognizing a great options opportunity at my company and contributing nothing to it for 2 years before our stock price increased roughly 15x (basically, I would have been a millionaire like some my other coworkers now are). We also had the "houses are always a good investment" bit of advice, despite living in a much smaller house in a much crappier town than we could afford. They're currently back at about mid-90s levels value wise, and my family did a horrible job of maintaining our home, so the value is actually less now. This covers basically what happened: http://infographics.economist.com/2015/uscitieshpi_11_2015/?n=21011894/2014/02/daily-chart-18&w=595 http://infographics.economist.com/2015/uscitieshpi_11_2015/?... Needless to say, getting out a few years back was the best decision I could have made for my life and career in tech. If you're a parent considering writing one of these letters, how can you fact-check yourself to ensure that you're not giving your children a huge disadvantage with terrible advice? I personally learned a lot from Investopedia and from messing around with Bitcoin in the early days (another opportunity where I could have made tens of thousands of dollars had I hung onto the 20BTC or so I had mined instead of selling them for $12/btc, happy to have paid for a new GPU I got just for the task).
    - lostlogin 10y ago
      > I ended up not recognizing a great options opportunity at my company and contributing nothing to it for 2 years before our stock price increased roughly 15x (basically, I would have been a millionaire like some my other coworkers now are). I'm unclear - is this your parents' fault?
      - phkahler 10y ago
        >> I'm unclear - is this your parents' fault? No, it's hindsight and regret. It's funny because it would be similar to picking that stock, yet the same poster says his parents lost a lot by picking stocks so apparently that's a bad idea. It's easy to get confused about that when "you worked there" as if that automatically should have given you insider information about a 15x increase in the stock price. No, picking individual stocks is not usually a good idea and Enron taught the lesson about investing in your employer - if they go down you have no income and no savings.
chao- 10y ago
I have also never heard of nor received such a talk. I do, however, wish I had been given one.
cloudjacker 10y ago
"buy real estate no matter where it is located it doesn't matter if there is no actual supply and demand constraint in our vast suburb in comparison to a city on an island or peninsula" the truth is that your parents don't know anything about economics and investing, they are simply people that had children
slavik81 10y ago
I never got the money talk. It was just a part of conversations. Me: "People sure have a lot of stuff these days. These self-storage places are huge." Dad: "Yeah. I figured it was a growing industry, so invested in one back ten years ago. The company made a lot of money, but management were a bunch of crooks. They spent all the revenue on overpriced purchases from their friends and family. No matter how good the fundamentals, you can't win if you're dealing with crooks."
mmagin 10y ago
Yeah. I think it could be a little more concrete than that. First, that there's a lot of cultural baggage around money, and it's important to try to know how that's effecting your decisions. Second, that all the sellers of financial products/services are trying to sell you something, they're no more altruistic than a used-car salesman.
erichdongubler 10y ago
Well...if they're telling you to do something specific, wouldn't that stop being a "principle"?

em3rgent0rdr 10y ago

How about teaching in small doses at regular intervals throughout their growing up. Or give them tools to learn by themselves.

vlunkr 10y ago
Couldn't agree more. Kids learn to handle money from their parents behavior, for good or bad. A single letter can't have the same impact that years of example and teaching can.
n72 10y ago
The scary thing is that banks actually sponsor investing games to be taught in schools, encouraging crappy habits like stock picking and trusting your gut and such.
- tominous 10y ago
  We had a yearly competition like that at school. The "winner" was always someone who put all their money in one penny stock and got lucky. A better approach is to reward the portfolio with the highest Sharpe ratio, but even that is flawed because it ignores systemic risk and confuses historical volatility with actual risk. Anyway, these games teach nothing about the essential habits of delaying gratification and living within your means. Those habits are far more likely to make you rich (and keep you rich) than any particular investment strategy.

sandworm101 10y ago

A good letter if you are a middle-class household without any real problems. But that american dream isn't applicable to everyone. I'd write a very different letter for a family struggling with one or more dependant/disabled family members. There, conventional saving can be difficult but also dangerous. A big pile of money or other assets can too easily be attached or lost to a horrible situation. I'd also write a very different letter for wealthy families. For them, asset protection is far more important than savings. They often spend more energy dissociating themselves from their wealth via trusts and other tax-efficient games than they do actually building savings.

underwater 10y ago
I think it's less about providing bulletproof advice and about reflecting on your own experiences. The children would have experienced the outcomes most of what the letter describes, it's just filling in the blanks. Most people see their own upbringing as an ideal to follow so this is giving a rule book on how to do that.
caseysoftware 10y ago
Since most of these seem to be parents or grandparents letters to their children or grandchildren, they're not supposed to be all-weather advice. If you have kids, you understand the morals and priorities that you attempted to raise them with, therefore you will speak to that shared understanding. If you're trying to say "different people in different situations have different requirements"... Yes, we know that. And?
- Dylan16807 10y ago
  The title says "every parent". Explaining why the advice needs to drastically change for certain situations is quite helpful. You should not be so dismissive.
  - nedwin 10y ago
    If you read the template they link to you would see that it's really a blank slate - more a placeholder for the conversation every parent needs to have with their children around money, relevant to that families reality.

rectang 10y ago

"Dear kid: The 'American Dream' is a myth. Its purpose is to flatter the rich that they are virtuous."

ericfrenkiel 10y ago

A modern - and superior - option would be a mobile application that could provide ongoing and reinforced instruction to the child. As a millennial, we're probably the last generation to learn how to write a letter in elementary school (as well as how to use the Dewey Decimal system to find a book in library), yet even I find the concept of writing a letter silly and more about nostalgia for the parent than the child who will probably wonder why you just didn't use email or IM. After reading this article, I'd rather have the couple minutes back in my life than trying to wonder why applying archaic communication to perennial concepts suddenly makes it relevant for the NY Times to cover.

pilsetnieks 10y ago
> A modern - and superior - option would be a mobile application that could provide ongoing and reinforced instruction to the child. Reminds me of the Young Lady's Illustrated Primer of Neal Stephenson's Diamond Age.
- angersock 10y ago
  And now imagine you're the company providing that, including very subtle advertising! So much profits. :)
  - nitrogen 10y ago
    Isn't that the approximate definition of Disney?
chucksmash 10y ago
> I find the concept of writing a letter silly and more about nostalgia for the parent than the child who will probably wonder why you just didn't use email or IM. Unless you forget to log into your account with the important emails for N days and GMail/Hotmail/Outlook/Yahoo recycles the account. This actually happened to me before I was in tech (i.e. properly understood the value of backing up my data). After my dad passed I kept an otherwise useless Hotmail account because it contained a lot of email conversations with him. I went to log in one day only to find the account and emails had been deleted. Hard way to learn that particular lesson. TL;DR physical possession of important things isn't an entirely obsolete idea.

n72 10y ago

In the same vein, as a kind of adjunct to my will, I recently put up a memo on github to be given to the beneficiaries and trustees of my estate, when it should come to that. https://github.com/nickgieschen/investingguidelines https://github.com/nickgieschen/investingguidelines Feedback welcome.

jbigelow76 10y ago
Sincerely, good on you for making sure you have your estate in order, so many don't; but I sure as hell hope I outlive github :)
hluska 10y ago
I have two pieces of feedback. 1.) The letter itself is excellent and full of great advice. 2.) I especially love that you open it up with "Hello from beyond the grave. Nice work - you've not only convinced me to write my own similar letter, but you've also given me a great template to follow. Thanks!

a_small_island 10y ago

So she kept a letter and ended up writing a book about it? What if the letter was just made up so she could write a book?

geerlingguy 10y ago
Sounds a wee bit like 'Rich Dad, Poor Dad'. Probably not helpful to someone who understands personal finance reasonably well, and wants to pass on that knowledge to their heirs... but that said, don't throw out the baby with the bathwater—all of these self-help-with-a-little-finance books are better than nothing, since most people (at least in the US) have little or no financial education.
seanp2k2 10y ago
I was wondering the same and would have appreciated if the piece was advocating for personal finance to be taught as part of a mandatory high school curriculum.

Zelmor 10y ago

I do double-bookkeeping on every expense in GnuCash. One of the best decisions I did in my 20s was not to go to bed without hitting in those couple numbers into the computer. Elliminated a lot of stress in my life, and made me more savings oriented. My parents never talked to me about money. Reading The Richest Man in Babylon did the magic instead. Check it out, even if just the wiki article. It is worth its weight in gold-pressed latinum.

13of40 10y ago

Huh- I clicked that with a little sense of doom that it would just be a list of ways I've screwed myself financially. Turns out I've been doing most of what's on the list.

m-i-l 10y ago

In my case I did see good examples set by my parents - although their frugality was a little too severe for my liking (they had come from poor backgrounds and grown up during wartime rationing), they did have plenty of good advice like never borrowing money except where doing so can generate a greater return than the debt (e.g. often a mortgage, or making the most of interest free credit for things you have money for and have to buy anyway). But there were some things that they didn't know about, because for example their generation didn't buy stocks and shares, and had a pension provided by the state. So there are many things I've had to learn the hard way, in some cases too late to get the most benefit. For example, I bought a lot of BP shares on 15 April 2010. That was 5 days before Deepwater Horizon, which not even the world's best financial experts could have predicted. After decades of investing in individual stocks that's when I finally realised that investing in individual stocks is too much of a gamble, and began investing in things like index trackers instead. I've actually been making notes over the years, initially to help crystallise what I've learned in my mind, but possibly also pass on to my children. It's things I'd have liked to have heard from a trusted source myself a long time ago. So while I hadn't heard of the practice of either a money talk or a money letter, I might consider it now. Judging by the other comments I might be one of the few people here who thinks this is a good idea. But it would be alongside the usual practising what you preach, given that the best way to teach is by example, and that education is continuous.

ktzar 10y ago

In most EU countries the letter you'd need to write is very different since, as long as you have a decent job, you'll get a decent pension which will allow you to live comfortably as long as you own property by the time you retire. Reading some of those letters made me realise how different risks families have and take in the US and the EU.

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sheepleherd 10y ago
These things have changed dramatically in the last couple generations, in Europe and in the US, and Asia. I would caution you against thinking that things will stay as they are. Hell, I'd caution you against thinking things actually are the way they seem to be.
thesimon 10y ago
> you'll get a decent pension which will allow you to live comfortably Assuming the state pension system will still be running by then and won't be totally broken due to birth rates < 2. At least in countries such as Germany they are currently facing issues because of the low amount of young payers in the next few decades. And politicians are just ignoring this to get votes from the mostly elderly population (recently in Germany: pension raise of >5% while inflation is at almost 0%). Sorry, but I think depending on the pensions in the EU is waay to risky. It'll probably fail like a ponzi scheme in few decades. I guess US-citizens are actually better off, because they have more money to save on their own.

eeeeeeeeeeeee 10y ago

I've always been curious about how best to approach this with children. My parents hid all their money problems from us because they didn't want to freak us out. On one hand, I respect this discipline. On the other hand, I feel it allows kids to grow up without knowing how important it is to budget. I think I would rather know the truth, even if it freaked me out because it allows kids to have a distorted view of money and there will be a huge wakeup call when they become an adult.

cmurf 10y ago

I think more than anything right now, the advice to give is how to avoid debt. Savings is certainly important, but increasingly a luxury, as friends still have school debt even as they contemplate having kids. And then think it's normal their kids will have school debt too. School debt is not normal. That used to be for only the classic professions: teacher, lawyer, doctor. College was either paid for by family, by grants, or you worked your ass off but had no debt after the undergraduate degree. Now everyone thinks debt is sane. If I were a parent, I'd plot with the kid how bankruptcy is part of their normal college education. Not debt.

SolaceQuantum 10y ago
As far as I understand, it is very difficult to clear student loan debt via bankruptcy.
- guroot 10y ago
  I think the parent meant bankruptcy as in not having any money for anything in your college years. You are correct Student loan debt can not be discharged in bankruptcy.
- Clubber 10y ago
  It is. People came up with the same plan. I believe it was popular with lawyers, but I could be mistaken. Get your degree, file for bankruptcy. Since they can't take your degree away and you have no collateral, there wasn't much they could do. The inability to relieve debt through bankruptcy is a result of that scam.
  - lawpoop 10y ago
    Yes, it was doctors and lawyers. Get out of school, declare banktupcy on $100+k of debt (abnormal at the time except for those degrees) and then in 7 years, start over with all the money you saved as a Junior doctor/lawyer.
houselouse1 10y ago
We gave our kids the same amount of money toward school. One went to community college, graduated basically debt free. The other went to a brand name private school and has taken on a painful amount of debt. The difficult advice I would offer is this: If you are not a top X% student, and the only way for you to pay for your education is to take on debt, you are making a mistake. Full stop. Find a cheaper school. Find another way, work part time and go to school part time. See if your church/mosque/community group/etc will give you even $500/semester toward school. Live at home or with a relative. If you still get gifts for Christmas, ask for money instead and put that toward books for Spring semester. Stop eating out, learn to make your own food, the meals on campus are too expensive. Find something that you can buy in bulk and sell one at a time on ebay. And of course, the best choice is to go back in time and be born into a wealthy family. You can make it work, but you have to be willing to set aside whatever vision you have about how college should be. Take what is available and make it your own.

srtjstjsj 10y ago

Thin submarine PR advertising for a book, not honest enough to put it in the title.

somethingsimple 10y ago

In the same vein, and my favorite, is Jim Collins' "How I failed my daughter and a simple path to wealth": http://jlcollinsnh.com/2011/06/08/how-i-failed-my-daughter-and-a-simple-path-to-wealth/ http://jlcollinsnh.com/2011/06/08/how-i-failed-my-daughter-a...

fefifofu 10y ago

This article and the book is exactly what's wrong with personal finance education. There is no special wisdom, clever tricks or golden rules in finance. Chicken soup for the soul won't help. Personal finance should be taught as a math problem. Figure out the cost of the lifestyle you want, and work backwards from there. If your fancy house, car, and dinners out cost $100,000 then you can figure out if your choices make sense... does you career choice match up? does taking on school debt make sense? etc. Or if you are older and made these life choices already and make $50,000, your math problem is a bit different. Does the honda or tesla fit? You can very easily see if credit card interest of 20% will help or hurt you achieve your goals/lifestyle if you do the math. None of this generic "avoid debt" or "house are the best investment" (garbage) advice helps and only confuses the matter. I think the only area that has more confusion and bad advice than personal finance is nutrition. In the letter, grandma says "go for a fixed rate mortgage"... what!?

jpatokal 10y ago
> You can very easily see if credit card interest of 20% will help or hurt you achieve your goals/lifestyle if you do the math. Is there any scenario where paying 20% interest on credit card debt (or, rather, getting into a scenario that requires that) would help you achieve your financial goals?
- fwn 10y ago
  Don't know about "financial goals", but goals: If your utility gain from the 20% interest is lower than the utility gain from the instant availability of that money. I can think of various situations where, if there were no better products available, this might end up making sense.
- sokoloff 10y ago
  Short term bridging of a company (or real estate portfolio). It's not so much the 20% APR that kills you; it's the length of time that you pay it.
jfaucett 10y ago
I'm mixed on your views, I agree with your math problem analogy, but I think there is general advice - just as there are general properties of numbers - that can always lead to better financial outcomes if people abide by it. For instance, what I've always done and it has worked very well for me is the following: 1. Maintain constant revenue stream, even if work is part-time or all you have is just an investment paying dividends. 2. Never purchase anything you can't pay for in cash at that moment. 3. Try to save 10% of your income every month - even in low income months. 4. Don't be wasteful and don't blow money on "small crap" you don't need. i.e. junk food, fast food, trinkets, taking unnecessary trips or riding first class, leaving devices/lights on in your house, gym/any memberships or monthly recurring fees you don't absolutely need. 5. Finally, don't purchase things on a whim. I've tried to live by these rules my whole life, learned them from my Dad, and they've worked very well for me. I spend money, but usually only for high quality things I research into for a long time before purchasing, like a piano, a plot of land, tools, etc. I have zero knowledge of actual research into personal or home finance so this example is just my gut intuition based on personal experience, so just view it as a biased anecdotal opinion :)

LoSboccacc 10y ago

you know what? this is utter bullshit. lived by this advice for 30 years or so, stashed a good amount of money, then the storm came, and I lost 90% of it in a very rough year. if I hadn't that, I could have had access to welfare. instead, working hard and saving money put me squarely in the 'have to spend for everything' class, without any benefit. so here's the advice letter I'm gonna write to my gc: hide everything. dodge as much as you can without breaking the letter of the law. go find the most skilled practitioner in tax evasion and have them hide whatever you earn so much you can qualify for welfare, free tuition, college scholarships for low income family for your children etc. being middle class sucks.