12 yo overheard net worth discussion

[ugeauxgirl]

DH and I were talking about an article re average net worths of Americans by age- DH said something like, "ours is 22 times that" at which point 12 yo picked up the article and did a quick calculation (future engineer) and gasped. Are y'all millionaires? After a moment of silence, I said we were and then told him that finances are private and he is not to discuss this with anyone. I hadn't planned on disclosing this much for a couple of years, but now that I have, I think I should probably add to the discussion. Or should I wait for him to ask? Anyone have experience or suggestions here?

 

[jjquantz]

I would think a 12 year old could begin to handle a discussion of the way that assets can generate income and how a million bucks won't last very long if you don't realize that spending money faster than income is generated is a very poor plan. Especially, if he is good at math.

 

[FUEGO]

I would think a 12 year old could begin to handle a discussion of the way that assets can generate income and how a million bucks won't last very long if you don't realize that spending money faster than income is generated is a very poor plan. Especially, if he is good at math.

+1 especially if the little guy is a future engineer.

My 11 year old understands the basics of how we're FI. We have a lot but it has to last us many decades so we can't spend it all. We're able to afford months of summertime travel because we drive modest cars and live in a somewhat modest house (compared to the median priced houses in the area).

She tells others that her parents are both retired but I've never heard her mention our net worth or even any hint at it.

 

[ugeauxgirl]

I have discussed some of that- just not in specific terms. I have "finance lessons" every now and again with my kids regarding assorted subjects. We have discussed living on 4% of your assets and I used a million dollars to illustrate the math- I just didn't tell him how much we have. And I doubt he has any idea how much we spend. Too early to disclose this much?

 

[FUEGO]

I have discussed some of that- just not in specific terms. I have "finance lessons" every now and again with my kids regarding assorted subjects. We have discussed living on 4% of your assets and I used a million dollars to illustrate the math- I just didn't tell him how much we have. And I doubt he has any idea how much we spend. Too early to disclose this much?

I wouldn't keep it a secret but you don't have to provide monthly balance sheet updates either. I'd have to hide my spreadsheets and Personal Capital net worth screen to keep it a secret. Then again I publish my NW on my own blog so it's kind of out there already.

 

[GrayHare]

I would not encourage it, rather wait for him to ask, then direct the discussion on how he too needs to put away money for himself. Start a bank account for him if he does not yet have one, for example.

 

[Aerides]

I think since the cat is out of the bag, you'd do better to have more conversations - asking what HE already thinks and knows about money, and set him straight. Depending on his friends and what he reads, he may have very different ideas from reality.

 

[Huston55]

I think you should use it as an opportunity to teach your 12 yo financial concepts; work them into his daily life (i.e.: establish a family bank, wherein you keep his deposits from allowance, etc., pay him a very high % rate, and simultaneously teach him the power of compound interest, LBYM & savings.)

Regarding whether a 12 yo being able to multiply two numbers makes him engineering material, well, I think the jury's still out.

 

[RunningBum]

I think it's a good time to talk about how much things like cars, houses, groceries, medical, vacations, etc, cost to show that $1M doesn't mean you have money to do whatever you want.

 

[HillCountry]

Each my kids got to spend $1M at their fourth grade, as a school project.

In another project, they made products, and spent a fixed amount of game bucks to buy the finished products from each other.

I believe financial literacy is part of Texas school curriculum.

 

[braumeister]

Wow, that is very encouraging, HillCountry. Hats off to your school system!

 

[REWahoo]

I believe financial literacy is part of Texas school curriculum.

This is news to me, and very welcome news at that.

Since everything I hear about public school education seems to be negative I guess I shouldn't be surprised I didn't hear anything about this:

House Bill 5, passed by the State Legislature in 2013, requires Texas schools to offer personal financial literacy courses as part of their enrichment curriculum. At its April meeting, the State Board of Education approved making personal finance a required high school class, and mandated schools offer a career and technical education personal financial literacy course. The curriculum for those courses is currently under construction and will be implemented in the 2014–15 school year.

http://www.bizjournals.com/dallas/n...earns-a-grade-of-b-for-student-financial.html

EDIT: And it looks like it may be showing positive results:

Not surprisingly, data released this month from the the Financial Industry Regulatory Authority's Investor Education Foundation, which seeks to promote financial literacy, reveal high school students who are required to take personal finance courses have better average credit scores and lower debt delinquency rates as young adults.

The study found "notable improvements" in credit outcomes for 18- to 22-year-olds in three states — Idaho, Georgia and Texas — where financial education mandates are considered rigorous by the Council for Economic Education.

Credit scores for those individuals in Georgia jumped nearly 11 points, or 1.8 percent, compared to average credit scores prior to the mandate, while young adults from Idaho increased their credit scores by 16 points, or 2.6 percent. Those in Texas raised their credit rating by 32 points, for a 5.2 percent gain.

US schools get failing grade for financial literacy education

 

[dirt_dobber]

I think since the cat is out of the bag, you'd do better to have more conversations - asking what HE already thinks and knows about money, and set him straight. Depending on his friends and what he reads, he may have very different ideas from reality.

really agree with this.

also increase your umbrella insurance - he tells one friend at school or in the neighborhood and word travels fast. Never under-estimate the greed of others.

 

[donheff]

I would discuss it further and focus on the issue of retirement accounts. I.e., the money is locked away in a "lock box" where it has to stay and build up to replace income many years from now. It doesn't mean we are "millionaires" in the sense that we can buy a bunch of junk now and it doesn't mean we are way richer than our peers - just better protected than people who don't or can't save for retirement.

 

[gromit]

I see good serious advice in the replies above, so I can't resist trying to add some less than serious ideas to keep the 12yo from getting too smug over the wealth.

1. Make sure the 12yo overhears your next "private discussion" on how you also have over a million dollars of debt and are keeping it secret. If anything gets out, this info will travel the fastest.
2. Let your 12yo know that he/she isn't a millionaire, but just gets to live with millionaires until out of school. After that, the rent to move back in and live with millionaires would be cost prohibitive.
3. Talk up the Bill Gates/Warren Buffett concept of giving away wealth, only stretch it to sound like giving away all of your wealth is a great idea.

 

[ExFlyBoy5]

I think since the cat is out of the bag, you'd do better to have more conversations - asking what HE already thinks and knows about money, and set him straight. Depending on his friends and what he reads, he may have very different ideas from reality.

I would agree with this. I was thinking back to when I was 12 years old and what concepts I understood. I was already learning about delayed gratification (I *really* wanted an Atari 2600 but had to save for it) and at that time I was fascinated with weather (still am) and was making my own forecasts from "available data"...so I think around 12 years old is a very good time to start having pretty serious conversations about $. It won't be lost on him.

 

[easysurfer]

Might be a good teaching opportunity. At 12, him being curious and a future engineer type, how about telling him that the road to being a millionaire isn't so far fetched as it seems and the recommend to him some books or websites. Before long, he might be suggesting how to have several million .

 

[ugeauxgirl]

I would discuss it further and focus on the issue of retirement accounts. I.e., the money is locked away in a "lock box" where it has to stay and build up to replace income many years from now. It doesn't mean we are "millionaires" in the sense that we can buy a bunch of junk now and it doesn't mean we are way richer than our peers - just better protected than people who don't or can't save for retirement.

This is an excellent point. I will do that. Thanks all for your suggestions- and I have explained the concept of "its our money- you just get to live here." Not long ago my grandfather died and I pointed out to son that my dad who is 70 just got an inheritance. If he wanted to enjoy spending money before HE is 70, he should expect to earn his own!

 

[audreyh1]

Congrats on your child's awareness, math ability, and ability to speak up and ask such a question! That's great.

 

[DrRoy]

My kids are in their late 20's and I have never shared our NW with them. They know we have investments and will retire soon, and that money has never been a problem in the family. They are both just now finishing college after never being very good students earlier or having a lot of ambition. I have some concern that if they knew what they might inherit some day they might not develop the mindset to save much for themselves. One son has saved from his income but the other has very little excess. Still, they both have been self-sufficient for 5+ years. I expect to tell them more in the future but do ont know when the time is right.

 

[ugeauxgirl]

Update on net worth discussion- so I have had a few more discussions with our son- fairly astonishing actually. He asked excellent questions, and I answered them. I explained that our money was for producing income so we don't have to work anymore and not for buying "stuff" I talked about how much we saved and spent and even our incomes. I talked about how getting in the habit of spending an additional $200 per week would require us having an extra $250,000 for retirement to support that spending. At one point I mentioned that I hadn't included our house in the net worth and before I could explain why, he told ME why- that houses don't produce income... I think he's got it...

We had a quick weekend at the beach last weekend and when the inevitable whining about all the stuff they wanted us to buy them came up- I sort of expected him to bring it up- but he didn't.

 

[MBAustin]

Great update! You have one smart young man there, and you're training him up right.

 

[Koolau]

Having "the talk" about family finances may depend upon the "child." Our son spent his money as fast as he got it and NEVER understood why we wouldn't buy him every "toy" his friends at school had. Of course, he never understood what it cost us to move school districts to get him into the best school in the county and one of the better schools in the state. When the latest software for a Gameboy cost $50 and our house was worth $150K, our son's pea-sized financial brain could not see why HE had to earn the money to buy his own games.

Having a discussion with him about net-worth at that time would have probably caused more problems than it would solve. So we never had it.

Once our kids got out on their own, our son made too much for us to help him with a Roth IRA as we did with the girls. Go figure. Oh, and he still spends every cent he earns - and he still does not have a Roth IRA. YMMV

 

[Walt34]

Having "the talk" about family finances may depend upon the "child." Our son spent his money as fast as he got it and NEVER understood why we wouldn't buy him every "toy" his friends at school had. Of course, he never understood what it cost us to move school districts to get him into the best school in the county and one of the better schools in the state. When the latest software for a Gameboy cost $50 and our house was worth $150K, our son's pea-sized financial brain could not see why HE had to earn the money to buy his own games.

That's why I think genetics plays a large role in how well some people can or cannot handle money. I see this all the time in family members. One of my nephews is a financial train wreck, his sister is doing quite well. Both raised in the same house, same parents, etc. Go figure.

Of course the kids have to be exposed to doing it the right way, only some are going to learn it on their own. But clearly some will never learn it no matter how hard the parents try.