You don’t tug on Superman’s cape,
You don’t spit in the wind,
You don’t pull the mask off that old Lone Ranger
And you don’t mess around with Jim.
-You Don’t Mess Around with Jim (Jim Croce, 1972)
And if the financial authorities have their way, you never, ever save. With the prevailing rates kept artificially low – I recently saw an online ad touting a terrific APR of .9% – and the advertising drumbeat continuing to push consumption, the economic system is set to continue driving everyday Americans to spend and consume. But the ability to save is crucial and is especially important for the kids to learn as we prepare them for their future. They face an economic future that will be radically different from what we ourselves faced as children and their ability to live within their means will be crucial to their well-being as they face choices that we never faced.
There’s been a recurrent mantra throughout the years with the kids, one that’s typically uttered when one or more of life’s speedbumps occurs: …and that’s why we save. Writing the check for an electrician’s or plumber’s visit? …and that’s why we save. Having to replace an old used car that hit a deer? …and that’s why we save. Paying to register a kid for any number of the activities? …and that’s why we save. It’s not a mantra that’s shouted in their ears as the check is waved in front of their faces, but one that’s repeated often enough that at some point in the future, they’ll recognize it as they go about their adult financial activities. My mother’s mantra – gotta pay the mortgage – began to surface in my own brain when I was a young adult now responsible for myself. Gee, mebbe I can buy that little Miata and take a trip to Cancun with co-workers (…gotta pay the mortgage). After a few moments of assessing my paycheck, I did neither.
There are certain things that we’ve explicitly done – or tried to do – with the kids through the years.
- Direct a specific percentage of their allowances, and paychecks when older, to their savings account so that they learn that such a thing exists.
- When they ask for something, talk through whether they actually need that item or simply want it. The follow-up, typically with toys and electronic games, is to point out that they already items similar to the requested item. Gee, son, a Nerf Rapid-Fire gun would be great but you already have two other Nerf guns and have lost all of the darts…
- Ask them to contribute some of their own savings for pricier items or events. This doesn’t mean that the first grader chips in for amusement park tickets, but high school students can chip in a portion of the cost of a chorus trip to a distant city; this is especially the case when fundraising opportunities are available.
- Decide what’s appropriate for the cost of adult items, such as chipping in on gas or on insurance for the car.
- When the kid starts talking about purchasing this or that particular item, talk with them about what else is hanging out there in terms of needs and/or wants. The kids truly aren’t used to thinking in these terms and on more than one occasion, a light has gone on behind the eyes and the commentary has been shelved.
There is presently no true financial rationale for saving, even if for no other reason than to avoid having to pay the interest cost of plunking something on the credit card. Some might have the discipline to immediately pay the items off and run with whatever points or rewards are offered with the card, but the reality is that most will not. The payoff however, will be in the future because the rates cannot stay at these levels indefinitely and when they snap back to higher levels – and reversion to the mean is a bitch – times will be truly harder than what they are at present. Anybody with memory of the interest rate spikes of the early 1980s recalls that these were accompanied by wrenching economic pain; couple that with today’s reality of dropping incomes and fewer benefits and what we face in the future will be horribly memorable in its own right. The flip side is that those who are capable of living within their means and saving money will be able to actually prosper.
There is a reset of the economic system coming, although I don’t profess to know whether it’s coming in the form of a stock market crash, rampant inflation or even the Sta-Puff Marshmallow Man. My job is help cut through the crap foisted by our economic system and teach the kids so that they don’t wind up scarred and crushed by economic hardships because they didn’t know better.