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November 25, 2009

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This is so true. I have been born and razed a saver. Had my first savings account at 5 and now am very keen on invesment and personal finance. I can't image how most people can't figure out that living outside of their means simply achieves a huge amount of debt.

Not sure I agree with all the generalizations coming out of the book. Relative to most posts that I've read over the past 6 mos, I would consider myself a hyperconsumer with a keen interest in personal finance (do not always practice what I read). My parents never saved nor did they spend, we just survived on whatever my father could get in the door (which wasn't much).

Today, I work hard to make as much money as possible to pay for family experiences as I believe in a balance between the now and the future so I don't wake up one day (with a large investment account) regretful of all the things we could have done when I was younger. Don't get me wrong, I have sufficient savings, but not relative to my income when compared to others I'm certain. The good thing is that our current income is sufficient to overcome financial missteps. Of course, I enjoy this blog in general and the diverse views shared by the posters. Thanks.

Not sure I agree with all the generalizations coming out of the book. Relative to most posts that I've read over the past 6 mos, I would consider myself a hyperconsumer with a keen interest in personal finance (do not always practice what I read). My parents never saved nor did they spend, we just survived on whatever my father could get in the door (which wasn't much).

Today, I work hard to make as much money as possible to pay for family experiences as I believe in a balance between the now and the future so I don't wake up one day (with a large investment account) regretful of all the things we could have done when I was younger. Don't get me wrong, I have sufficient savings, but not relative to my income when compared to others I'm certain. The good thing is that our current income is sufficient to overcome financial missteps. Of course, I enjoy this blog in general and the diverse views shared by the posters. Thanks.

AZnOUT if you have some sort of a system that works for you, you should be fine, but can you expand on these experiences. I don't have a family yet (I'm 21) but plan to and would like as many perspectives as I can get.

My wife and I have always been very conservative, very frugal & thrifty, and savers. I am a retired engineer, my wife, formerly a librarian and a retired teacher
We raised our three children that way. For example, we didn't give them allowances, they each had jobs such as delivering newspapers, cutting grass, washing cars, fast food, pizza parlors, gas stations, delicatessens, housecleaning, installing car stereos, you name it. I also made them pay for all message unit and long distance calls they made from home. When they bought inexpensive used cars I gave them interest free loans and payment books which they used without a single problem.

Now for the results:

Oldest daughter - AA degree - She did very well, saved hard, moved out later, and supported herself very well. Today, at age 51 she has a SEP-IRA worth $1.5M, about $300K in a taxable account, and lives with her third husband in a custom home that he built which is fully paid for.

Youngest daughter - BA degree - She is a real saver, a carbon copy of us. Her husband made her give up her fantastic job managing a high rise office tower, upon marriage. The marriage lasted 19 years and she received a $2M cash settlement and a huge spousal support payment every month for 9 years. She is now 50 and in a promising relationship with an engineer that I much admire.

Our son - Apprenticeship as an Auto mechanic - He was a pretty good saver while he lived at home and has never been unemployed. As a boy he was heavily into sports and always getting hurt. He was an avid surfer, but that ended after the fin hit him in the face one day, requiring 100 stitches to close. He then formed a heavy metal rock & roll band and played clubs in L.A., acquiring lots of cute young groupies. After a while he realized they weren't good enough to make a hit record so he dissolved the band.
Next he got very involved with expensive water ski boats and spent lots of money in that sport with lots of friends that were hangers on. When he tired of that he took up sky diving and made over 200 jumps and also made some money taking videos of other jumpers on the way down. When he figured the odds of a fatal accident were getting too high he dropped skydiving and took up car racing. After hitting the wall a few times he realized that this sport could also lead to a fatal accident so he quit that.
All these sports were very expensive and credit cards were just too available and this eventually led to a bankruptcy. Along the way there were many very hot girl friends, a couple of which I met - they were spectacular but far from being marriage material. By this time he had sowed all of his wild oats and figured it was time to settle down.
Today, age 45, he is married, has a nine year old daughter, is his company's top salesman, lives in a condo that my wife and I had no use for but didn't want to sell because of tax reasons, leads a quiet family life, and has a net worth approaching $900K, thanks entirely to two very lucky real estate transactions where he bought very low and sold just before the bubble burst. His wife is a real saver and finally so is he. He is a total extrovert, led a totally different life from me (even having tattoos) and could sell refrigerators to eskimos, but all's well that ends well.

I grew up relatively poor, although it took many years for me to figure that out!

We lived in my grandparents former farmhouse on a couple acres left over after most of my grandparents' farmland was sold to developers. My parents never discussed money with the family--I just thought that everyone received boxes of hand-me-downs from the church, had vegetable soup or waffles for dinner twice a week, and spent their weekends picking and preserving free end-of-the-season veggies and fruit from local farms and orchards.

I definitely internalized the "never spend anything, ever" motto of my childhood, even though it wasn't explicitly discussed at home. I'm very uncomfortable with debt & I still can't bring myself to spend on some typical middle-class expenditures (such as new SUVs or resort vacations at Disneyworld for the entire family).

I've been married twice previously, to men who grew up with similarly poor backgrounds but somehow had very different views of money that I did--they both adhered to the "if you have anything, you spend it all", and "everyone else has one and I deserve one too" philosophies. I tried to go along with this because I was pretty much ashamed of my poor white trash type of background, and it seemed that times had really changed and "everyone" was spending and living at that level. But of course, I got burned!

The marriages failed on other big issues, but now that I'm divorced again it is a relief to finally be able to control of my finances. I do regret the years I spent married in which I allowed myself to be talked into letting our family spend at such a ridiculous rate (I also regret our separate bank accounts, which allowed my 2nd husband to "vanish" most of his salary for years, but that's another story!)

Today, I talk with my two tween years children about spending and money. They get an allowance and from trying to budget it to buy toys they want I hope they are starting to understand the value of money.

Old Limey -

Your experiences and results are always fun to read. Thanks for the perspective on the children as one can see we all have unique paths, experiences, and characteristics that shape the people we are and the people we want our children to be.

Ghuraba -

I don't have any particular system that is a one-size fits all approach, but I will expand on my comments. I too grew up with limited means (broke) and the mentality of the "kid in the candy store" when it came to spending after graduate school. To a large extent, I borrowed against my future earning power to live a life in my late twenties that I never experienced in my life (understanding that my career upside was realistic and I logged a lot of hours to fund our adventures)...had fun, saw the world through work and personal travel, but always maintained an emergency fund, some investments, and most importantly, sufficient life insurance for my family should something happen to me. Despite all the planning in the world, I'm in my mid thirties with 3 kids and have dug myself out of debt for the most part. While I'm fortunate enough to have the wherewithall to help certain family members financially with medical, living expenses, etc., I learned the hard way how unprepared and reliant on "open credit lines" I was with the sudden deaths of my father last year and my father-in-law 4 mos later. Funeral expenses charged on my open lines quickly (as well as those amounts rejected by my credit issuers) resulted in lenders reducing credit lines just as abruptly. Faced with my own individual credit crisis, I closed what was left on my lines and focused six months on paying everything off. I don't borrow anymore and set aside a sum of money so I'm never reliant on credit again. Obviously, death of a loved one can have a profound impact on people in many ways, but for me and the financial well being of my family, I embraced the experience to make the necessary adjustments in our life as we move into the next stage. Not altogether frugal, spend our money on the most important things (i.e., family experiences/vacations,etc), max out my 401k (four years and running), and maintain a certain level of taxable savings should another crisis occur. I fully anticipate to spend then next 14 years (until I'm 50) ratcheting up our savings and investments geared toward retirement, then college savings for the kids.

I believe you are slightly mistaken in your reading of the concept/passage. He's not saying that a child "will" have a certain outcome. It's a discussion of statistical data, and tendencies are not destinies.

Modest economic background alone isn't the issue. It also involved the nature of the parent/child relationship. Consequences for abuse and neglect in that are far more likely to lead to hyperspending, dysfunctional relationships with money in the future, than for those whose parents were far more nurturing and effective in their parenting skills - regardless of socio-economic status. So even if few monetary resources in a familly, there could be creative, loving, nurturing resources which will more than make up for a lack of money in terms of potential for the child's future.


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