Thursday, June 8, 2023

Teaching Young People About Fiscal Responsibility

Maybe it isn't even possible!

A reader writes, in response to a previous posting, that they were eating tuna salad as they read it, as they had no leftovers to take to work for lunch.  They are living frugal and have almost paid off their mortgage.  But how to teach their kids about these things?  Young people actively sneer at efforts to conserve capital.  You read it all the time online, "Boomers tell us to save money and not get tattoos or eat out in restaurants!  Like $15 for lunch is going to make a dent in my $50,000 student loans!  Get real, Boomer!"

And of course,what they want is student loan debt forgiveness, which as we have seen, is easy to talk about, and hard to do.  Even Biden's modest $20K forgiveness plan (which some might argue isn't modest but akin to giving millions of young people the equivelent of a free car) is mired in court battles.  GOP legislators (and a few conservative Democrats) have vowed to put a stop to it and even have passed legislation to that effect. Of course, it may be merely symbolic, as they don't have the 2/3rds majority to override a Presidential veto.

But I digress. Or did I?  Because expecting free money to bail you out is part and parcel of the problem for young people of any generation and of any era.  I noted before that in my college days (spanning three decades) they would offer credit cards to students, who would promptly rack them up to the limit and then go delinquent on payments.  A tearful phone call later, Dad pays off the debt and Junior has to cut up the credit card.  In some instances, the parents get a credit card for Junior for "emergencies."  But in college, an emergency can be "we're out of beer!"  You remember what it was like to be young, don't you?

My own brother fell victim to this.  My Dad set up a charge account at the SU Bookstore, and my brother charged everything in the world he could think of, to it.  Turns out they sell a helluva lot more than just books!   Of course, Dad went ballistic and closed the account.  I am sure the bookstore people had seen this same pattern before - after all, they are the ones who suggested setting up a charge account in the first place, "for convenience."

Kids are just not keen with money.  Well, some are - you see them on occasion and it is impressive.  When you meet an 18-year-old who saved every birthday check he ever got from Grandma (instead of spending it on candy or beer) it is a rare and wonderful thing.  I always wished I was that kid.  But I wasn't.

Immediate gratification is the problem.  When you graduate from high school and go off to college and/or get a job, get your license and maybe that first car, well, you feel that finally you are an adult, and for once in your life, you get to call the shots.  Pretty soon, you realize why other people were calling the shots for you for so long.   The teens and 20s are dangerous years.  You can make bonehead decisions that will haunt you for life.  Sign up for $50K in student loans, or rob a liquor store - same effect, your life is marked from then on, or at least for a decade or two.  It is possible to make decisions that will devastate yourself, your family, and others.

For example, I wrote before about a "friend" who used to steal cars and do drugs and get drunk.  He crashed a stolen car head-on into a young lady on the night before her wedding.  He destroyed her life, her fiance's life, her family's life, and his family's life - as well as that of his own.  Just one stupid decision - or a series of them - and all hell breaks loose.

Granted, you can make stupid decisions when you are 40, but the probability is far less.  Hopefully by then, you have a career and a spouse and maybe a family and whatnot.  You stopped partying and binge drinking (if you ever started) back in your college days.  The longer you live, the less chance you have of making bonehead decisions.  Moreover, as your days grow shorter, well, the consequences don't last as long.  Of course, oldsters end up making horrible decisions when they slip into dementia.  But that is why they call old age "a second childhood" as old people often turn into adolescents and then eventually children.

The problem is, at a young age, you want to start living now.  You want to try all the great adult things you have been taught about, and your raging hormones aren't helping any.  You want to have sex, of course, preferably several times a day.  Now you know why women are attracted to older men  - young men are just too exhausting. Plus, older men have their shit together more.  While a 20-something may think a hopped-up economy car is "cool" the 40-something has a Mercedes.  Oh, and he doesn't drive it like an asshat all the time.

Worse yet, young men in particular tend to hang out with other young men, which tends to cause trouble.  You walk down the street and see a 20-year-old and he is scared of you.  You walk down the street and see three 20-year-olds, you should be scared of them.  Because young men are horrible influences on each other, goading each other on to do things they later regret.  And if they decline to participate in some ill-conceived scheme, well they will be called a "faggot" or whatever.

Of course,  young women do the same thing, often setting poor normative cues for each other.  Maybe that is one reason some young women are attracted to "bad boys" - their peers tell them that the successful nerd is "lame" or something.  But in terms of men versus women, the worse young women do to each other is cause each other to have eating disorders or low-self-esteem issues.  Young men can goad each other into violence and criminality.

And spending.  Young men will blow thousands of dollars adding "mods" to plebeian cars, not to impress the ladies (who are not impressed by a Subaru with a fart muffler) but to impress their fellow young men.  Similarly, women dress not to impress men, but impress other women.  Men generally don't even notice a woman's new hairstyle or clothing.  They have no idea how much a high-end handbag costs.  Only other women do, and the $10,000 handbag sends a message not to men, but to other women - that I am a bitch to be reckoned with!

As you get older, of course, you stop thinking this way.  It takes time, and often fiscal responsibility requires a whole series of life-changing events in order to kick in.  For some, it never happens.  But when you turn 30, you realize the Klown Kar you are driving isn't "cool" but marks you as an immature teenager.  When you are working at a law firm and taking clients out to dinner, you don't want to chauffeur them around in a Trans Am.  No, the boring sedan is the ticket - and your status is determined by how new it is and what brand.

At a certain age, you start to realize that the amount of money you will earn in a lifetime is finite.  You may not know the exact number, that doesn't mean it is infinity. Sounds pretty self-evident, but I remember back in my early 20's thinking that someday, somehow, I would have "more money" through some undetermined modalities.  Of course, that turned out not to be true at all.  I had to scramble to catch up - going back to school (yet again) and finding a new career.  Sure, I made more money, but sadly, I kept on spending it as well.

It was about the time I started this blog that I really thought about how I was spending money.  It isn't an easy thing to do - particularly when your habits have been ingrained for decades at that point.  And introspection is the hardest thing to do.  Externalizing is so much more fun!  It isn't my fault I have these student loans!  I don't even remember college!  I was drunk at the time!  Where's my loan forgiveness?  Everyone else is getting it, why not me?

For me, the first revelation came at age 25 - an age where we now know that the human brain finally finishes developing.  I had this epiphany that whatever my life was going to be, it would be based on my own efforts and hard work.  I could not rely on an inheritance (as some friends of mine had) to live off of.  If I wanted to succeed, I would have to improve my own lot in life and stop blowing money on stupid things. So I went back to school, graduated, and then moved to the city for a better-paying job and started law school.

For many, that is a non-starter. "Move away?  Why should I have to?  Bring the jobs here, to our depressed town in the middle-of-nowhere!  And bring a Walmart with you, while you are at it!"

Kind of hard to argue with "logic" like that.

So maybe fiscal responsibility isn't something you can teach or instill.  It either has to be learned the hard way - by banging your head against the wall - or it is never learned at all.  Or maybe some of us are predisposed by genetics or by upbringing to be thrifty.  A friend of mine adopted a child from China, and she has saved every penny she ever made by babysitting and pet sitting.  My friend was chagrined to find out the balance in her daughter's savings account was greater than her Mom's.

But you hear this a lot with adopted people and orphans - they tend to be thrifty, ambitious, and successful.  Perhaps there is some subconscious insecurity in the mind from early on that causes the orphan or adoptee to be more cautious with money and more ambitious as well.  As a spoiled middle-class kid, no such insecurity exists - you want something, you throw down a tantrum until you get it.  Kind of hard to learn fiscal responsibility that way.

And I talked about this before - parents who "don't want our children to want for anything" or to "have all the things I never had as a child."  They think they are doing their kids a favor, but instead are creating perpetual dependency.  I noted before how one of my bosses had three dependent children, some in their 30's, who had Dad pay for everything from the rent on their apartments, to their brand-new cars.  I recall one particularly awkward telephone conversation with his daughter, while I was in his office, and she complained that the two-year-old car she had was worn out and she wanted a newer, sportier model.  It was kind of awkward, as she was my age, and here I was, making a six-figure salary at his firm, and she had yet to leave the nest.  It was a nightmare of his own creation.

Looking back, I kind of wished my parents had said "No" to me more often, or at least explained their finances more fully.  If I had known how much they were making and how much they had to spend to keep us fed and clothed, I probably wouldn't have asked for so much from "Santa" - as I would have realized more how dear money was to them.  But my Mother had that crazy idea that you should spoil your kids, because that was doing them a favor.  It wasn't.

Very few, if any, parents want to share their finances with their kids.  Most kids have no idea how much money Mom and Dad make, what their fiscal responsibilities are, and how much they will need for retirement.  Often Mom and Dad don't know, either.  I know my parents flew by the seat of their pants for decades, and when retirement was thrust upon them, well, they crash-landed with what they had - which wasn't too bad, actually.

Of course, the problem with talking to your kids about money is that, even as young adults, they might not appreciate how the numbers work.  To a kid or even a young adult, any amount over $1000 seems like infinity.  So you tell them you have a couple hundred grand in your 401(k) they will chastise you for not buying a Ferrari with it.  After all, that's an infinite amount of money, right?  Lottery winners often fall victim to the same logic.

I think too, parents are reluctant to share financial information with their kids, lest the kids blab it all over the neighborhood.  So it is hard to explain to a young person that, yea, we have all this money and a nice house and whatnot, but it didn't happen overnight and moreover, we will need that money later on, for retirement and Junior's college fund.

The latter is a young person's first and most significant dealing with finances, and sadly, it is a learning opportunity that is often wasted.  I know a number of parents who have told their kids they should major in whatever interests them, and not to worry about the cost of college. Both are ludicrous propositions.   You would never buy a car that way - not caring about style, type, brand, and quality, and just paying "whatever" price the dealer conjures up.  Hell, no!  You'd pick (hopefully) a practical car that serves your needs best, has good reviews and is priced within your budget.

Yet, when you hear these sob stories about $100,000 in student loan debt (more than twice the national average) it usually involved a "name brand" private college and a degree that is utterly useless in the job market.  Here was a great opportunity to illustrate the cost/benefit analysis as well as how an investment (in this case, in an education) can return far more, over time, in terms of payback.  This is not to say that education should be vocational training, but that majoring in "Communications" or "Philosophy" at a $40,000-a-year university is just not affordable for the middle-class, particularly when paid for with student loans.

I noted before that one of the greatest expansions in real estate in recent years has been in "luxury student housing."  I returned to my Alma Mater and noticed a medium-rise building with a banner running down the side of it, advertising such.  It was a far cry from my University days, where we made do with older, roach-infested buildings, because we were students and thus by definition, poor.  Luxuries were for people who had money, not people who borrowed it.  But then again, we didn't have these private student loans back then - maybe that is the connection, perhaps?  (Yes, yes it is).

But just because they'll let you borrow yourself to death doesn't mean you have to do it.  And again, this is a great learning moment that seems to be squandered on many young people.  Maybe a lot of parents are uncomfortable talking with teens about these things.  Maybe teens are bored by all of it. I know at that age, sitting down to talk with Dad wasn't a pleasant experience.  I doubt I would have been receptive to any good financial advice, even if he had it to give.

Maybe a better idea is to start off younger.  My Dad tried that with my older siblings, giving them an "allowance" and then asking them to account for every penny of it.  My sister would end up crying as my Dad yelled at her because she could not account for 39 cents of her allowance.  She was too young to realize she could  have just lied and said she bought a candy bar or something.  Not only did she not learn fiscal responsibility - she learned to loathe it.

In modern times, companies have tried to sell junior debit cards for kids.  The idea is to provide this spending card that your kid can use, and you can monitor his spending habits and thus have a learning experience with it.  If Junior does his "chores" you can reward him with cash on his card, which he then can decide how to spend - or save.  You can even set savings goals and whatnot and work together on them.  It could be a learning experience, but then again, from what I have seen in the past with college students having credit cards, it could also be a disaster.  Overdraft fees could swamp the whole thing.

On the other hand, in today's economy, cash no longer exists, for the most part.  So learning how to handle debit and credit cards is part of the modern norm.  All I can say is, though, I would have chafed at the bit, if my parents set up such a card system and had me do "chores" to earn money.  Or maybe not - maybe I would vacuum the house three times a day so I could buy weed.  Who knows?

The kiddie debit card is a nice theory, but again, kids being kids, I doubt it would work out well - although it sounds like a dream for control-freak parents.  I know a young girl who ran away from home at the tender age of 14.  Her Mom had set up a savings account for her to teach her fiscal responsibility.  Once she became a hormonal teenager, she pulled all the money out of the account and spent it on drugs.  YOLO -right?  Might as well have fun now than to save for a rainy day.   And yea, eventually she achieved some form of financial solvency and independence, but not until after age 30.

Maybe that's the ticket to teaching young people about fiscal responsibility - just wait until they turn 30.  When they are no longer young people.

Of course, by then it is too late.  Maybe we are destined to be spendthrifts, at least early in life.