Are Parents Terrible Financial Role Models?

This Friday, Dan Kadlec of Time discussed the findings of a study that discovered that parents are terrible financial role models. In Week 1 of Financial Peace University, Dave Ramsey discusses in the Super Savings lesson that parents make their children believe that they don’t have sex or money, to which he remarks, “It turns out, they had both!”

There are a number of topics that strain the parent-child relationship, and money is one of those topics. Although my family did not discuss money openly, my grandparents, particularly my grandfather, were decent role models. Unfortunately, I succumbed to peer pressure and tried to live like everyone else during my 20’s and learned to appreciate their lessons later in life.

If it ain’t broke…

My grandparents married in the early years of the Great Depression. They started out with little to no assets. In fact, their first home was a one-room shack. According to my grandmother, the home required regular pat-downs of sprinkled water with a broom to keep the dirt floor from becoming dusty. When both passed, their net worth was in the black. Although they had a few debts, paying them off was a non-issue since they secured the savings and investments to cover the remaining balances.

While they were alive, they shared weird lessons:

• Pay for purchases using cash. When my grandfather purchased a vehicle, and when my grandmother purchased a new living room set, they paid for those purchases using cash.
• Don’t fix it (or replace it) unless it breaks. Whether it was the washing machine, the garbage disposal, the vehicle, the fence line, or the plumbing, my grandfather would attempt to fix the item himself, hire someone if he couldn’t, and then get first and second opinions before he ever replaced an item.
• Pay your bills on time and in full each month. As my grandfather aged and his fine motor skills weakened, I was given the role of writing the monthly checks. He would lie out the envelopes each week, which had been opened initially when they arrived. He would verify the amount the amount to be paid and had me list the date and amount paid on the invoice and in his business-type checkbook register.
• Save for a rainy day with safe, reliable investments. My grandfather saved a decent amount of money in the bank to cover unexpected expenses such as hospital visits and home emergencies. He also invested in real estate by paying for properties in cash.

My grandfather didn’t have an MBA. He wasn’t a college graduate. To the best of my knowledge, he never graduated from high school. Life was his teacher.

Last Will and Testament

The one lesson I wish he would have taught me before he passed was proper estate planning. Like most families, he was very private about the specifics of his nest egg. Unfortunately, he only verbally declared where he wanted his money to go after he passed. Although each family member was well aware of his intentions, the lack of a will forced his estate into Probate Court. No matter the amount or the value of property, money and entitlement changes people. In my conversations with various individuals and families, I have learned that no family is immune to the heartache caused when money matters affect family matters.

Let’s Talk About It

It may be a difficult talk to have with your children. It may be a difficult talk to have with your parents. It is a critical, honest talk that each side needs to have with the other on a continual basis.