In one of my recent blogs I asked 11 financial experts ‘What is the one thing you wish you had known about money as a kid?’. I got great responses and if you haven’t already please read here. For this blog I want to focus on just one of the responses I received which I found really thought-provoking. It was from Financial Life Planner, Dan Haylett. Dan wished he had known:
“That if you earn money by doing something you love to do then you will find the true meaning of money. It’s not about how much you earn, it’s about how you earn it and what you do with it.”
I believe this is an important topic for parents to discuss with their kids. By default, money is seen as a tool to buy the things we want. I’ve previously spoken about other ways to use money, such as saving it to buy something later and, to use money to build wealth (links to these blogs at the end). What Dan is talking about here, however, is not how money is a tool but instead how it can have purpose. This insight can have a massive impact on your kids’ future financial wellbeing. Let’s break down the points captured in Dan’s response: “It’s not about how much you earn, it’s about how you earn it …” Before I go further I want to caveat that I feel this applies only when you are earning at least enough to have a moderate standard of living. Even if you are doing the most fun and purposeful job in the world, if you are not making enough to live a moderate life then financial stress and unhappiness will soon creep up on you. Now assume that there is a choice between doing a job that is enjoyable and purposeful versus one that is high pressured but brings in the ‘big money’. Which one would you want your kids to choose? (of course, ideally they will find a job that is both purposeful and pays well but that combination is not always easy to find). In my view, most parents want their kids to work hard in school so they can get a ‘good job’. Most of the time that means picturing a job that pays well. This is due to the rationale that if you have a job that pays well then you will have financial security and the ability to enjoy the best of what life has to offer. Unfortunately this aspiration doesn’t always come to fruition. Often those that earn more end up spending more and therefore are not as financially secure as they could (or should) be. Therefore, instead should we be encouraging our kids to work hard in school so they can get a job (or start a business) but one which will have a purpose and make a positive impact on the world? Even if their chosen pursuit doesn’t command as much money? I believe those that work doing something to make a positive impact (noting most people spend more time at work than anywhere else) will be happier than those working just as a means to gain money and enhanced status (all else being equal). So, when you talk to your kids about their future job, instead of saying “What do you want to be when you grow up?”, why not ask “What problem are you going to solve when you grow up?” This will set the tone that the purpose of working is to help make a difference rather than just to earn money.
“ … and what you do with it” I’ve written a lot about encouraging parents to warn their kids of the dangers associated with trying to ‘Keep Up with the Jones’’ (i’ll be releasing another blog soon on this). Let’s be honest, when we buy something expensive it can feel good. This could be from the sense of pride that we can now afford something we previously couldn’t afford (as we have a desire to always want something we can’t have). Or, it could be from feeling more powerful and able to show the world you earn enough to be able to afford the things you have bought (a typical keeping up with the Jones’ mentality). The question is, do these feelings really make us happy? In most cases the answer is yes, but only short-term. Over time the benefits wane but the cost of maintaining the status and drive for that original good feeling increases. Therefore, I agree with Dan that parents should look to encourage their kids to see alternative purposes for money. Showing our kids that money can be spent on experiences and helping others can be very rewarding. Stories of adventure and kindness are good feelings which last a lot longer. I am 100% certain that I’ll be continuing to tell stories of the great travel and life experiences I have had for a long time to come. I can’t think of a single story where i’ve talked about a brand-new, top of the range, BMW I once owned (except for the purpose of this blog of course!).
So when your kids do get some money, get them to think about what they are going to do with that money. Open up opportunities for them to help others or to save towards an experience (whilst still saving at least 10% for the long-term of course!). Show them that money can be used for other purposes rather than just buying ‘stuff’. I’m sure they will be see the benefit of these alternative uses and I do believe that people who spend some of their money on helping others and on experiences are likely to be happier than those just spending all their money on ’stuff’ (all else being equal). Another suggestion in terms of ‘what you do with your money’, is to consider investing their savings in a way that helps make the world a better place. You can read more about helping your kids invest in a sustainable manner here. Last word Let’s make sure our kids grow up learning that having money alone doesn’t make you happy. When talking to your kids about money, why not:
Help them consider ‘what problem are they are going to solve?’ when talking to them about their future careers.
Encourage them to spend some of their money on experiences and helping others.
Investigate investing in a sustainable manner.
The more they see the benefits of using money to do something purposeful, the less likely they are to care about ‘the Jones’’.
I’ll be releasing a couple of new blogs over the coming weeks as part of my ‘How to teach your kids about …’ series. These will focus on Budgeting and Keeping Up with the Jones’. Make sure you subscribe here so you don’t miss them.
Thank you for reading!
Will
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