Teach Your Children Well

I borrowed the title of this article from a song by Crosby, Stills & Nash because it seemed very appropriate. I recently read an article written by Ric Edelman about the 50th anniversary edition of The Game of Life. This game was fun to play when I was growing up, but it was also very helpful as it taught me about how to manage money at an early age.

After reading the article, I was surprised to hear how they had changed the rules for the new edition. While reflecting on these new rules, I identified six areas that concern me as a financial planner, whose primary focus is to help people retire successfully.

  1. You can’t go broke.
  2. Money is in multiples of $10,000.
  3. You get $200,000 to start, but immediately pay for a college degree.
  4. You can’t buy auto, life or homeowners insurance.
  5. Houses always increase in value.
  6. Gambling is investing!

In the original game, I moved around the board and was presented with financial options. I had to make decisions about these challenges and opportunities and, in many cases, had to take chances that could make or lose money. It taught me important lessons about how to make money, lose money, protect my assets, and ultimately how these decisions can impact my life. In the new game of Life, you can’t go broke. In the original game, I could end up as a millionaire or lose everything. But in the new version, you either end up at Millionaire Estates or Countryside Acres (sort of middle class living). A far cry from ending up in the poor house! From my perspective, this is like the “no winner” rules in youth sports today. Removing the winning vs. losing from the game is not a realistic reflection of life.

When I work with clients, we collaboratively define long-term goals and develop a plan for their future. The purpose of the plan is to give them a “roadmap to retirement” and a benchmark against which to measure their progress toward those long-term retirement goals. I believe it’s valuable to keep score and know how you are doing vs. the plan. That allows you to adjust your lifestyle in order to potentially increase your probability of success (the “number one” concern of many of our clients is to not outlive their money).

Money is in multiples of $10,000 and you get $200,000 to start the game. Imagine real life if you were given that kind of nest egg to start. Wow! One of the key lessons I learned when playing the original game was how to count money. I learned to organize it and pay attention to how much I had to pay for certain things. I didn’t necessarily think of it or call it “budgeting” at the time, but that is what I was learning to do. Speaking of things that cost you, in the new game, you have to choose if you want to go to college right up front and if so, you have to give the bank back $100,000 immediately. Of course, there is no FAFSA form to fill out, no essays to write to obtain some financial aid, no 4–6 years of studying and taking exams, you just decide that you are going to college and you now have a degree.

Although certainly not realistic, it does demonstrate the value/cost/investment associated with obtaining a college degree. The new game also eliminates any way to protect your assets against risk. In the original game, you could buy auto, life or homeowners insurance. If you didn’t, you might have to deal with a catastrophe later—just like in real life! But in the new game, insurance isn’t an option, so if you get hit with an accident or some other disaster, you don’t have any way to protect yourself.

Can you imagine owning a house without having homeowner’s insurance to protect against a fire, flood or wind damage? Most of us would think believe that obtaining insurance is a “no-brainer”, yet this game of Life doesn’t even offer it as an option.

In the original game of Life, you had to buy a house. Paying $15,000 for each house seems inexpensive by today’s standards, but that was a pretty reasonable price for a house 50 years ago. Now you can buy multiple houses playing the new game which can range from $80,000 to nearly a $1,000,000. But, contrary to what happened in 2008, the “Life” homes purchased always increase in value! The last recession and bursting of the real estate bubble taught us all to be much more realistic in our thinking in regard to home prices. In addition to the up-front cost to purchase a home, there are many financial obligations that have to be incorporated into personal budgets/taken into consideration. In real life, you have the option to purchase or rent, with each having its own set of financial pros and cons.

Finally here’s the real kicker—the new game presents investing as gambling. Players can use a roulette wheel where you pick a number and if the wheel lands on the number chosen, he/she wins ten times the amount bet/invested. The game says, “Pay your investment to the bank. If the number does not match, you lose your investment.” Going to the local casino or racetrack should be seen as entertainment, not a retirement plan.

As a financial planner, I help individuals and families develop investment strategies that are designed to match up well with short and long term goals. There is a good deal of time involved to get to know a client well enough so as to better understand how to effectively design a plan that ultimately is in his/her best interest.

Parents Magazine reported that there are five values that you should teach your children by age five; honesty, justice, determination, consideration and love. This excellent article reminds us that young minds absorb new information and incorporate it into their behaviors and lives at an early age. Teaching them about winning and losing is important. Understanding that there can be significant consequences from the decisions they make is a valuable life lesson.

The game of Life has changed, but real life hasn’t. I believe that it’s important to instill in our children the same strategies that successful retirees have exhibited; work hard, live below your means, save for retirement, have an investment strategy and purchase the appropriate insurance to protect their assets and their respective, desired lifestyle.

We never know when life will take an unexpected turn. Whether it’s you or your children, let’s protect what has taken so much time and effort to obtain. Over the years, I have been asked many times to speak with some of my clients’ children regarding good fiscal “behavior” and find that covering the topics mentioned in this article is usually a good place to start.

For a more comprehensive discussion of these concepts, please contact our office and request a copy of the book, which I co-authored with four of my associates, Money Talks: Life Lessons to Help You Plan Now, Save Wisely and Retire Well. Feel free to request one to give to you children as well. Part I of the book is the most relevant for them. It may not be a game, but it might help your children get a better start toward saving for their future.

 

Teach your children well.