Sandwich Generation: The Money Habits We Inherit
Some financial customs that get handed down can serve you and your kids well, but others may be destructive
Jeff Brown has nearly 20 years experience as a personal finance columnist for publications including The New York Times, The Nightly Business Report on PBS, The Philadelphia Inquirer and MSNBC.com.
“Never spend principal.” That’s an ironclad rule I learned from my mother, who picked it up from her parents during the Depression. It means that the money you put into savings needs to stay there and left to compound, at least until retirement. Dipping into principal is like burning firewood in August and eating seed corn, singing and dancing through the summer like the fabled grasshopper.
This guideline is just one of the frugal habits I acquired from my parents.
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Thriftiness Runs in the Family
For the most part, my wife and I buy used cars, strive to save big chunks of our income and fix things ourselves when we can. But we’re not suffering lives of self-denial. We take nice vacations and I own a four-seat airplane (though I'm quick to point out it's 40 years old). I’m pleased to say that our frugality is shared by my son. We all spend money when it’s really worth it, not when it isn’t.
It’s easy to live by a set of rules when they’re shared by the people you care about.
Family financial behaviors are very powerful. Sometimes, however, they work in reverse. I have a buddy who makes up for the lean years of his childhood by spending lavishly as an adult — quite foolishly, in my view.
How Bad Habits Can Be Perilous
And, of course, some bad habits that get passed down through the generations are extremely damaging.
Following in the tradition of a family of spendthrifts can be disastrous if you’re living on a modest income.
So, as family-oriented Thanksgiving approaches, it’s not a bad idea to stand back and think about your financial habits. Embrace the good ones and begin breaking free of the others.
How to Review Money Habits
Start by looking at your family’s definition of success. Who have you and your parents admired — the big spenders or those who can stretch a dollar? Has applause gone to the households with the biggest house or the ones whose kids do best in school? Is saving praised or do family members pressure one another to loosen up and “spend a little, enjoy life,” like drunks pressing booze on the abstemious?
Are your family members in the habit of making destructive rationalizations? If you detect a generational pattern of short-sightedness and self-indulgence, it’s time to change your habits — and to help your adult kids change theirs, if possible.
Of course, being the only tightwad in your family can be unpleasant, even embarrassing. You may wonder: Will my parents or kids think I’m not doing very well?
(MORE: Tips for the Sandwich Generation)
This is where it’s helpful to reprogram the ego. Change the things that make you feel good. I’m not doing a lot for my image by driving around in a 15-year-old banged-up pickup, but I get a glow of self-satisfaction thinking that I’ve made a really sound decision in doing so.
Teach Your Children Well
Although leading by example will probably influence your adult children better than stern lectures, it doesn’t hurt to tell them about your budgeting habits, savings goals and easy-to-emulate techniques, like funneling automatic payroll deductions into your employer’s savings plan, setting up monthly transfers from your bank account to a mutual fund, paying off your credit card each month, diversifying your investments and sticking to a budget.
When you see an opening in a conversation with your kids or even your relatives who are in their 20s, mention that you just saved a tidy sum by, say, changing your cell phone service or your homeowner’s coverage. All those little expenses add up. They may get the idea to follow suit.
You may be surprised to see how much younger family members appreciate your financial advice.
A few years ago, my wife and I steered a nephew from certain disaster by persuading him not to buy a home at the peak of the housing bubble. In his branch of the family, people tend to marry young, start families and buy homes. He was smart and open to sophisticated financial analysis, though, and chose to rent after we pointed out how long it would take to break even if home prices dipped after he bought a place.
I’ve often talked about my financial philosophies with my son, Dash, now nearly 18. I don’t sit him down for long lectures, but I do salt my little object lessons into day-to-day conversation as occasions arise, like the time he mentioned the new BMW a classmate received for his birthday.
Driving an old pickup allowed me to afford my little airplane, I explained, which gives me a bigger ego boost than any car possibly could. I told Dash that the peace of mind you get from living within your means is worth a garage full of BMWs.
That’s what I learned from my mom and dad — and it’s worked out pretty well for me, too.