HELPING OTHERS and LEAVING A FINANCIAL LEGACY
Statistics show that 70% of wealthy families lose their fortune by the second generation, and 90% lose their fortune by the third generation.
(This means that all the hard work that went into building that fortune was lost by the second or third generation.)
The Millionaire Next Door
This book is highly regarded in the finance community, and it’s about the results of a study that two authors conducted on the profiles of American millionaires. In their study, they identified seven common traits that they say showed up time and time again in people who are wealthy. If you want to be a millionaire, you should start thinking like one, and this could be great information to pass down to future generations.
These traits were:
1. They live below their means.
2. They allocate their time, energy, and money efficiently.
3. Financial independence is more important than displaying high social status.
4. Their parents did not provide economic outpatient care.
(Parents did not bail them out. This allowed their children to learn and fix their own mistakes which in most cases they will then not make the same mistake again. When parents bail out their children, they are more likely to keep making the same mistakes again and again. There are no learning opportunities.)
5. Their adult children are economically self-sufficient. (Because of #4)
6. They are proficient in targeting market opportunities.
7. They chose the right occupation.
As they say in an airplane, secure your oxygen mask before you secure your children's.
If you are incapacitated, you will not be able to help others.
One of the best gifts you can give your children is to ensure you are financially set for your future so that you will not need to rely on others financially later in life.
Ensure your financial stability first before you help others so that you can be a blessing and not a burden to others later.
Helping Children
To help ensure your children do not squander their money away:
Help children focus on experiences rather than things.
Do not go out to eat so much that your children do not appreciate it anymore, or do not do something so much that it is not special anymore.
Spend money on someone else. As the saying goes: It’s better to give, than to receive. By letting your children see how you use money and your resources to help others, you will leave a deep lasting impression on them.
The Jelly Bean Test
This is something you can try to see if a child understands deferred gratification, or it can be used to teach a child deferred gratification.
Test: give a child one jelly bean (or something else you see fit) telling them that they can have that jelly bean, BUT if they do not eat it for (an x-amount of time), they can then get two jelly beans.
Example: One parent did this by giving their child one jellybean before bed, setting it on their nightstand explaining that if they didn’t eat it that night and will bring it to them the next morning to show they didn’t eat it, they will get two jellybeans that next morning.
Helping Children with Disabilities
The Money Guy suggests looking into ABLE Accounts. They say these are very similar to 529 as they grow tax-free, and these accounts may not count against social security or other benefits you or your child may qualify for. Click the link below for more information about ABLE Accounts.
Again, remember it can be hard to help others if you are not financially stable. Be sure to still focus on your savings and retirement so you can help your children. This can be a heavy discussion, but if you are in this situation, you will be planning two retirements: one for you and one for your child when you pass away.
Per the Money Guy, saving for children with disabilities would fall into Step 8 of their Financial Order or Operations.