By Dr. James M. Dahle, WCI Founder
We have decided that we're not going to leave anything to our kids after all. “Why?” you may ask. We are worried that we are ruining their lives.
It all started last year on a spring break vacation. My son discovered that his seat on the plane was back in the “cattle car.”
You see, when he went out with me on a speaking gig to San Francisco last year, we were upgraded to first class (I now have Gold status on Delta), and we sat in the very first row. He had never been the first one off the plane before. Now, he thinks that's normal and complains when he doesn't get to sit in first class, much less the first row of first class. The other kids are just as bad. We took them to Great Wolf Lodge for one night of the trip and visited their indoor water park. The next night? Motel 6. They didn't even want to go to the pool. The 16-year-old doesn't want to have to drive a “hand-me-down” car now that the oldest has gone off to college. And the oldest is mad she didn't get to take the car with her. There's always something.
“The boat isn't big enough to take all my friends.
The car isn't Tesla enough. My friends have Teslas.
The theater seats don't recline enough.
He touched me.
She gave me a dirty look.
We're out of my favorite treats.
Why do I have to move out of my room when company comes?”
Well, we're sick of it. And we're going to do something about it.
Economic Outpatient Care
Personal finance enthusiasts have long been aware of the concept of Economic Outpatient Care. This comes from a chapter in The Millionaire Next Door which demonstrated that adults who were given significant money by their parents actually were far more likely to become “Under Accumulators of Wealth.” Well, if it is bad to give them money as adults, it's probably even worse to give them anything nice while they're still minors. But we don't want to have to suffer. So, we've implemented a two-level standard of living in our house. Some examples:
- We have a door with a lock on it. They no longer have doors on their rooms.
- We eat filet mignon and shrimp. They eat mac and cheese.
- I eat Life Cereal and Crispix. They eat bagged cereal, but we only buy it past the expiration date.
- We fly first class on vacation . . . and then pick them up at the train depot when they arrive.
- We ride in luxury cars. We hired a chauffeur with a 1982 Chevette to bring them and meet us at their soccer games. (They now have to earn the money to pay the fees for soccer.)
- We wear $200 jeans. Their jeans have rips in the knees. (This doesn't seem to bother them much, for some reason.)
- We have house cleaners come over every couple of weeks. But they don't clean their rooms or bathrooms. In fact, they empty the dirty mop buckets into their tub, toilet, and sinks and throw the collected garbage from the rest of the house into their bedrooms.
- We send our clothes out for a laundry service. They wash their own. On washboards in a bucket of cold water in the backyard.
Disinheriting the Kids
As you can tell, we've had it with our spoiled kids. It isn't that we don't love them. It's that we DO love them. And we think it's impossible for them to adopt our lifestyle and still turn out as good people. But we're going beyond just making them artificially suffer in their youth. We're also basically disinheriting them. That turned out to be harder than we thought.
Decanting the Trust
As you may recall, part of our estate plan is a Spousal Lifetime Access Trust. While Katie is the main beneficiary of the trust, the kids were secondary beneficiaries. That's a problem, especially if we keel over any time soon. If that happened, they were going to get a bunch of money at ages 40, 50, and 60. No more. We have decanted that trust into a new one. We still had to keep them as beneficiaries, but now they don't get their inheritance until they're 90. And then only if they can pass an almost impossible personal finance exam.
Killing the 529s
We also have saved up sizable 529 accounts for college. They have even put some of their own money into them from time to time. Our college freshman didn't seem very motivated to apply for scholarships last year. We think part of it was that she thought she was on a parental scholarship. Well, no longer. The fun thing about 529s is that the beneficiary can be changed at any time. We actually own the whole thing. So, we changed the beneficiaries to their cousins. Now our kids get nothing, and we can ruin our nieces and nephews instead. Just kidding. We don't want to ruin them either. Remember, we love these kids. We've taken the money out of the 529s completely, even with the penalty for doing so. Most of the money was spent on a new wakeboard boat and a truck to pull it.
Charging Them Rent
We thought it would be beneficial for those kids to start really learning how life is. Not only are we making them prepare their own tax returns, but they're getting an adult-style budget. They pay for their own cell phone bills, their own gasoline, their own clothing, and all their own entertainment. No more allowances. It's called a job, kids, and we both had them.
But we had to go above and beyond that. You see, they've got sizable UTMAs (their 20s funds) and Roth IRAs. Those are both technically their money, so they can only be spent on stuff that benefits them. Well, we've got a lot of expenses that benefit them. Room. Board. Their share of the health insurance. They're now paying us for all of that using their UTMA and Roth IRA money. And they're not getting any discounts either.
Whitney was appalled to find out that room and board at home this summer was going to be twice what it was at college. But why shouldn't it be? She doesn't share her room at home. We figure the 10% early withdrawal penalty on those Roth IRAs is well worth the lessons learned. There are no more big fat modeling paychecks from WCI either. If they want to work for WCI, they can come to the conference and scan badges for minimum wage. If they don't want to do that, they can go get a real job. I know those UTMAs were supposed to be their “20s fund,” but we think using them to pay for their teens will teach them a lot more about life.
We expect by the time the younger ones leave home, they won't have anything left in their UTMAs or Roth IRAs at all. Perfectly disinherited and ready to achieve on their own. Now, they can donate plasma for their grocery money, like I did in college. If they even get in, that is. We're not giving them any application tips anymore, much less reading their admissions essays or paying for ACT study courses. Those days are over.
Overall, we expect these changes to really help our kids be solid achievers and take their appropriate place in this great society of ours. They'll be so much more proud of themselves when they realize how much they can achieve on their own.
What do you think? Have you disinherited your kids yet? Why not? What did you spend the money on? How else are you celebrating April 1? Comment below!
The “he touched me” part comes off as pretty inappropriate. That might want to be reworded. That being said, love the message on EOC and how it can negatively impact kids!
What?! That’s a very normal thing for siblings to say
do you have kids? If you do, then you know this is common. If you have siblings then you did this with your siblings when you were growing up
Omg – kids say this all the time. I hope your response was also in line with the 4/1 spirit.
You must not have kids. The he touched me, she touched me is a regular complaint between my 4!
Hazel-
I’m so sorry for whatever has happened in your life that reading that phrase triggered that thought in your mind. As others note, this is common “back seat behavior” among siblings who are bored on a long car ride. We call it recreational fighting in our house.
Can’t forget the classic “I’M NOT TOUCHING YOU” while hovering a finger millimeters away.
Hi,
While I’m sure all get what you mean and all can relate with our own kids making whiny comments like “don’t touch me.”. But I don’t think your response to Hazel comment was fair or appropriate. You are openly commenting that Hazel had to have something bad happen to her. it’s rude and insulting to such a literate audience. I get it. It’s a PC world, the woke movement is overboard.
But I would have expected a better professional response to Hazel instead of presuming she was a victim of abuse or some sort.
BTW, it also has no relation to the financial content of your blog post on proper financial upbringing and retaliation to spoiled brats so when I read it, I can tell you’re frustrated and venting in this article, as am I raising 3 of mine own saying and demanding the same crap. But my point, there is no need to insult a reader who I presumed was a fan.
It wasn’t meant as an insult. It was meant to express compassion.
I heard compassion from that statement.
Dr Dahle I think you are great and have greatly contributed to the lives of countless future professionals. I love your content and appreciate all you do.
The way you see this is a bit of a rorschach test. I don’t mean that as an insult. What’s the first thing you think of? If you have kids or have been a sibling, this comment is a thousand miles from being inappropriate.
I think you are really on to something here!!
And you almost had me. If it wasn’t my son’s birthday as a personal clue I might have been really perplexed!
I actually think that your plan is great. I’ve seen too many people struggle and go from lower middle class or even low class to high paid professions or start successful businesses.
Then they shower their kids with gifts and material things and praise and the children end up jobless or dependent on their parents. And entitled.
This may be an April first post but it’s still valid.
Is this an Aprils fool joke? I highly doubt your kids are acting like this. I think you must have raised them a lot better than this. If this is not a joke, I certainly hope they can grow out this and gain something insightful.
I’m with you this is an April fools joke!
I got half way through before I realized it was a joke! It was the inheritance at 90 and killing the 529s that tipped me off. No way you’d waste good money. Good one though!
And….it’s April first…
I almost wish it wasn’t a joke. American kids are so messed up right now and I’m sick of it. They have the most of any generation of kids in the history of the world and still whine and complain about not having enough. I am so glad I’ve made the decision to not have one. I started doing my own taxes still in high school (not realizing I messed up my mom’s return), got a job at 14, paid my mom $100/mo for the privilege of driving her car, paid for my own gas, car insurance etc. I got room and board covered by her (so I was still spoiled). Kids need to pay for some non-essentials to teach them lessons about life and finance. Otherwise they flounder when you drop them off at college and immediately max out a new credit card buying things they “deserve” for “working so hard”.
My kids do their taxes and start getting jobs at that age, but we haven’t charged them to rent the car yet nor made them pay for the insurance. We buy enough gas to get them to school and back, beyond that they have to use their money.
“I am so glad I’ve made the decision to not have one.”
My dude. Are you basing your opinions about “kids today” on what you’ve seen on Fox News or what?
You get me every year!
There is a kernel of truth in every joke. I am blessed with two well educated , hard working mid thirty yo kids.
Some of this is genes and luck.However I did try to instill some some financial sense at an early age.
A few examples
I paid them a dollar if they didn’t order a coke or Shirley Temple. They learned to love water.
They worked for spending money during high school and college.
When we traveled I gave them a fixed amount to spend every day. This immediately stopped running to every souvenir shop. They learned to share and budget. ( If they didn’t spend it all, they got the remainder when the trip was over)
When my daughter objected to driving a beater during senior year I offered her a bike.
A few times my wife and I traveled first class (points) and the kids were in coach
When my four year old wondered why there were cars with skis at motels several miles from the mountain I knew I had to do something.
I’ll have to try the “you can have $3 or you can have soda with your hamburger” thing with my 7 year old. I think that would be a good lesson.
Happy April 1! Make sure to go joy riding in your Tesla today.
Hahaha this is brilliant. Bet it was fun to write! Happy April fools 😄
Ha! I actually did sell my plasma in college after burning through my first month’s living money from my dad. I was so mortified and couldn’t bear the thought of going to him. I never told him and he’d probably be equally mortified that I did it. But it was a really good lesson and I learned quickly how to budget my money.
I wasn’t the only one of my siblings that donated plasma for living money. I think most of us did at one point or another. I don’t know that my parents thought anything strange about it. Get a job, donate plasma, it was all kind of the same. Money doesn’t grow on trees.
This is hilarious!
In all seriousness, I had a moment of concern about spoiling my own kids when my 7 year old once asked me, “Dad, is the school bus complimentary?”
At least get them set up with a whole life policy and a % AUM advisor before you cut them off. Don’t want them to get advise from advisors who get them “average” returns. Your kids aren’t average, are they?
What’s wrong with bag cereal? It was part of living like a resident.
Past expiration date is when the coffee kicked in and I realized it wasn’t March 32.
Our kids’ grandparents started buying really nice cars, since they can’t take it with them, and my son would chauffeur them around when he’s back from college. He calls the mid level Mercedes as the spaceship, given the LED track lighting that can be set, or just continuously change. It is cool, but we will see if that genie can go back in the bottle.
Hah love it!!! Thank you for this post as this resonated with me even though it’s April 1st. As much as we love our kids, setting them up from a-z feels like we allow them to skip steps. Pressure turns coal into diamond and friction sharpens a knife, a life with SOME difficulties build character and resiliency. Hopefully, they get to live long after we’re gone, what are they to do if daddy and mommy are gone? It’s a disservice to them if we remove all of the obstacles. There is value in some struggle, failing, figuring it out, getting back up and going through.
We hope to be shepherds who can guide and support to a point, not road plowers or weather manipulators where every hill is turned flat or every thunderstorm is made to be a day of sunshine. There’s a quote “Do not pray for an easy life but the strength to endure a difficult one.” There’s value in obstacles and adversities and this was a good reminder, albeit quite ironically from an April fools day post.
OMG. We are dying of laughter over here.
The sad truth is that this really isn’t an April fools. The degree of spoiling, particularly of young women, is pathetic. And people wonder why we have to “import people” to have “fertility” rate stay the same or increase. Yeah, other countries’ people fertility lol
Got any data to suggest that the rate of spoiling of women vs men has somehow changed over the years or is even different at any time period? Or is that just your (unusual) opinion?
JD, the degree of nonsense jobs, including a lot of the teachers at university that currently teach that one can’t discern women and men’s skeletons, or that men are better at sports not because of biological realities, but cultural, is the end stage of precisely that. There have been policies that are sexist, favoring women (what is that btw?) for decades – hiring quotas, government contract breaks if you are person or sex XX, etc. Also for other groups. We live in clown world. If you can’t discern that, I’m sorry, it’s quite obvious if you actually see the propaganda, look at public policy, and consider media and social media.
Thanks for sharing your opinion. Repeatedly.
While this may have been a joke, it was the story of my life. I found zero humor in it. My door was removed from my bedroom. I had garage sale cloths that I bought from age 12 on. At the age of 16 I became homeless. When my father died I found out from a friend of the family. My two 1/2 brothers inherited millions. Twenty years later one is homeless in Ann Arbor and the other one lives in a one bedroom condo. Meanwhile, I am doing quite well.
While many laughed at this, there are some children that are living this situation. This humor was in very poor taste.
I’m sorry you were homeless as a child and I’m glad you have been able to rise above that. I find it interesting that your own life experience seems to be in alignment with the tongue in cheek suggestions of this post (hard childhood = adult success and vice versa) but that you didn’t like the post. I’m trying to figure out if it was just kind of triggering to you due to your unfortunate experience or if you felt the recommendation of intentionally created hardship for children should be real rather than an April Fool’s post.
Your experience reminds me a bit of one of my favorite Will Smith movies, The Pursuit of Happyness. I’ve never really been homeless myself, but I did have a childhood friend whose parents lived in a tent for a long time. I was really too young at the time to understand all that that meant.
What they say is true – there really always is a critic
April fool’s! But we really should all be doing more things like this regarding kids and finances.
You had me up to “We eat filet mignon and shrimp. They eat mac and cheese.”
Great post!
Like most well-off parents we struggle w giving our kids a better life than we had without spoiling them.
If growing up in an impoverished environment was the key to maximizing wealth accumulation then why were there only two people from the central valley of California (ie stockton and Fresno) in my medical school class at UC San Diego school of medicine. The rest you ask? Yes, all from nor and so cal with most attending private prep school k-12. In fact, the other guy from the valley and I grew up in strongly supportive farming families that bent over backwards for us to have cars at 16 and pay for our college. I have never personally know of a person who got kicked out of their house at 18, had parents not pay for even part of their college, or was charged rent by their parents who became a success. I have an endless list of personal friends that had wasted potential and never achieved any of their career goals in those situations. Sure it is likely that my kids will not make as much as I do (God forbid they become marine biologists!) but I could care less as long as they can save 20 percent, pay their bills, and that they love their careers.
I know this post was likely a joke, but I also know a lot of you out there were agreeing with not paying for college, charging your kids rent, and not buying them a car. Most of you make over 100k yearly and will as a consequence cause your kids financial aid package to be basically nothing, you need to make up the difference.
I think you’re probably right.
There is also the possibility of inducing resentment when kids know their parents can provide a decent standard of living but purposely do not.
My kid’s financial aid package was also nothing. I learned that there actually is a maximum EFC on the FAFSA.
Nice. It took me to “picking the kids up at the train station “ to remember what the date is today.
Happy April Fool’s Jim!
I thought it was a real post for the few paragraphs. As I read into the points under Economic Outpatient Care, I realized it’s April 1st! You still make some good points, as always.
Ha that’s a great April fools joke, Jim, you almost had me there! The part about inheriting the trust at 90 made me suspicious, and then depleting the 529b was the clincher.
Great concepts, though- I really like how you mentioned the economic outpatient care by Millionaire Next Door – that concept has really stuck with me while raising my kids. They’re in college now bleeding me dry with tuition but I make sure they stay humble and feel some sort of guilt that we’re paying this much for college. My husband says I shouldn’t make them feel guilty. My response is – if I didn’t make them feel guilty, who will? Someone has to!
More highly paid professionals need to be financially tougher on their kids! Great article , Jim!
Wish it wasn’t April 1. Sounds like good parenting to me!