Picking up Nickels

Wednesday, November 15, 2006

10 Rules for raising financially independent children

I was re-reading my copy of The Millionaire Next Door recently, and although this book doesn't delve into the mechanics of saving and investing, it has always been an entertaining read for me. I particularly like the values that this book stresses: discipline, thrift, saving, investing, and living beneath your means.

As a parent, the case studies that document adult children who are the recipients of economic outpatient care (EOC) from their wealthy parents really jump out at me. EOC is the euphemism that the authors use to describe an allowance that parents give to adult children, which ultimately makes these children financially dependent on the wealth of their parents.

To me, the thought of my children never gaining financial independence is a frightening one! I certainly wouldn't be doing them (or myself) any favors by supporting them financially for the rest of their lives. In fact, they are probably already tired of my continuing reinforcement of the importance of saving and frugality.

This brings me back to a section of the Millionaire Next Door that discussed a list of guidelines that wealthy parents used to produce successful adult children:

  1. Never tell children that their parents are wealthy.
  2. No matter how wealthy you are, teach your children discipline and frugality.
  3. Assure that your children won't realize you're affluent until after they have established a mature, disciplined, and adult lifestyle and profession.
  4. Minimize discussions of the items that each child and grandchild will inherit or receive as gifts.
  5. Never give cash or other significant gifts to your adult children as part of a negotiation strategy.
  6. Stay out of your adult children's family matters.
  7. Don't try to compete with your children.
  8. Always remember that your children are individuals.
  9. Emphasize your children's achievements, no matter how small, not their or your symbols of success.
  10. Tell your children that there are a lot of things more valuable than money.

Pretty good advice in my book...


  • Excellent advice! I don't have kids yet, but when I do teaching them about finances will be top priority!

    By Blogger Kelly, at 11/15/06, 12:14 PM  

  • I know quite a few students (high school/college/graduate) that are driving brand new Hummers/BMWs/Benzs on their parents dime. Then I see those same students get into the real world and start complaining about insurance & how it cuts into their drinking money. EOC is completely true and completely disturbing. Thank you for putting a word to it.

    By Anonymous EconUpdate, at 11/17/06, 2:04 AM  

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