How to Help Your Children to a Successful Life

I keep coming across articles about success and education, and recently I came across one that reveals how screwed up American thinking is on this subject.

Many parents want their children to grow up to become part of the "elite."  They ask experts how to accomplish this goal.  Some parents think that studying to the exclusion of all else, in high school or even grade school is the answer.  Recent studies have found that most of the successful "elite" participated in at least one extracurricular activity in high school or grade school.  So maybe the answer is to enroll your children in at least one sport or music program every year of school.  Unfortunately, this is not the answer.  Really it is a game of odds, and evidently moderate extracurricular activities will increase those odds.  If you want to know the odds, compare the number of upper class people in the U.S. to the number of middle and lower class people.  Even if you do everything perfectly, the chances of your child becoming one of the successful "elite" are very low.  Also keep in mind that many other parents are doing the same things.  This is a large scale case of "Keeping up with the Joneses" that will just keep getting harder.  Every year, parents are trying to one up each other, to give their children the advantage (often causing their children unnecessary misery).  If you subscribe to this definition of success, then you are ultimately setting yourself, and your children, up for failure.

The U.S. upper class is shrinking.  Anything anyone does, with the sole expectation of joining the upper class, is gambling.  Further, the odds are getting worse.  Some experts are even beginning the question whether the cost of a college education is worth the risk (the consensus is still yes, it is worth it, but there is significant disagreement, especially with regards to graduate degrees).  If success is becoming part of the "elite" upper class, then then the odds are stacked against you and your children, no matter what you do.  There is no way to even get close to even odds, unless you are already part of the upper class, and with the shrinking upper class, even that is not a guarantee.  At this point, luck has a bigger impact than anything else, starting with whether you were lucky enough to be born to rich parents or not.

The problem here is the definition of success.  Parents that are willing to put effort into "helping" their kids become part of the "elite" define success as working long hours to make huge amounts of money.  In case you have not heard, income beyond about $20,000 a year per person does not increase happiness.  In fact, there is significant evidence that it does the exact opposite.  If rich and decadent misery is your definition of success, then I guess you are justified in gambling your time and money on the low odds that your child could join the "elite," at the cost of his or her happiness.  If you want your child to be happy though, read on.

Most parents want their children to be happy.  Some parents mistakenly associate happiness with wealth.  As mentioned before, recent research has shown that increasing income increases happiness up to about $20,000 per person per year.  As income increases further though, happiness tends to stay the same or decrease.  Teaching your children good financial skills can lower the optimum income, and teaching them to be happy with less can lower it dramatically.  Most families of 3 can live comfortably on less than $30,000 a year.  That includes $400 a month for food, $1,200 a month for rent (in most places in the U.S., a two bedroom plus den home or apartment costs less than that for rent or even mortgage payments), $400 a month for insurance and maybe a car payment, with $6,000 a year left over for savings and retirement (or $3,000 a year for tithing and $3,000 for savings and retirement).  Instead of preparing your child to spend his life working 60 to 80 hours a week (average in the U.S. is currently about 60 hours a week) to make $150,000 a year of money he or she will never have time to spend (on anything he or she will have time to actually enjoy, anyhow), why not prepare your child to work 20 to 30 hours a week earning $40,000 a year?

Imagine this future: You have taught your child how to spend money very wisely.  He works a 30 hour a week freelance job that pays around $40,000 a year.  He could work 40 hours a week and earn a bit over $50,000 a year, but he does not need to, and frankly, he would rather spend that extra 10 hours a week taking care of his family and enjoying his life.  His wife works 10 hours a week on the side but not because they need the money.  She enjoys the work she does, but she also enjoys taking care of their 2 children.  His flexible 30 hour a week schedule allows her to work those 10 hours, because he can take care of the children during that time (and he enjoys that extra time he gets to spend with the kids).  Their total yearly income is about $47,000 (he earns $40k a year, and her 10 hours a week brings in another $7k).  They live in a high end trailer park in a double wide trailer (3 bedrooms and a den, with about 1,500 square feet).  They own the trailer, which they paid off the $35,000 cost in 5 years.  They are paying $400 a month (fairly high, but the park is fairly high end) in lot rent.  They splurge a bit on food, so they are paying $450 a month for it.  You taught him well, so they bought their current car with cash.  As such, they have no debt at this point.  Car insurance costs them $80 a month, utilities (electric, gas, internet, phone, and maybe cable TV) cost around $500 a month (rounding up; we pay half that).  They go on regular dates (one important way of maintaining a good marriage relationship), which costs $40 a week for diner and maybe an activity, add another $30 for the two hours of baby sitting (costs in the U.S. range from $10 an hour to $18 an hour, so $15 is on the high end; comes out to $220 a month).  Add in gas costs around $200 a month.  This all comes out to $1,850 a month.  Their yearly costs for monthly expenses is $22,200.  Other expenses, like clothing, car maintenance, medical costs/insurance and such might max out around $5,000 a year on average (you taught him well, so he carefully selected a car that is easy to fix in a driveway, and even when it is not, the parts are easy to get and reasonably priced).  After the $27,200 with maybe about $800 of emergency and entertainment expenses, your son is living fairly well on $28,000 a year to support a family of four.  Just to stack the odds against him, let's assume that he is part of a religion that advocates paying exactly 10% of your income in tithing.  That is $4,700 a year.  That leaves him with $14,300 a year going to savings and retirement.  If he puts $4,300 into retirement (just under 10%), then $10,000 a year is going to savings (hopefully you taught him well enough that some of that is going to mutual funds and other lower risk investments that offer a better return than a savings account).  They plan to start looking for a house in 5 years, once they have $50,000 saved, but they are seriously considering buying land and moving the trailer to a permanent foundation on that land, because the cost of the land is $50,000, and the cost of moving the trailer is $50,000, but the cost of a smaller plot of land with an equivalent house is more than $200,000.

Based on how he is living, your son is quite well off.  He might not live in a mansion with servants, but he does not have to spend any time managing those servants, and he does not have to work harder to keep them paid.  He spends more time with his family each week than most rich people do in a month.  He takes jobs that he wants, and no one tells him when he has to start and end work each day.  If we wants a vacation, he can just avoid accepting contracts that will require him to work during that time.  He is saving enough money that if he does decide to buy the $200,000 home, he can pay $80,000 down (the trailer depreciated $5,000 while they lived there), and with the budget surplus, they can pay the rest of it off in 10 to 15 years, without changing their standard of living at all (if they move the trailer, they can pay it off in 2 years).  Once the house is paid off, the rest of that $10,000 a year going to savings will ultimately be retirement money (ok, so some might go to the kids' college, but if he taught them to manage their money as well as you taught him, they will be able to do it mostly without help).  Your son could probably retire at 45 on this budget, if not sooner.  If he enjoys his work enough to keep it up until 65, he will be able to live like a millionaire when he retires (because he will be one).

Your children do not need to be among the successful "elite" to be happy.  They can be perfectly happy among the successful average, if they learn to be happy with less and manage their money well.  Even simple things, like renting a yacht for a weekend a year instead of buying one, can dramatically reduce expenses without giving up too much luxury.  Frankly though, most expensive luxuries don't get used often enough to justify buying them.  A huge house with giant rooms, a hot tub, and an indoor swimming pool might be nice, but unless you use those rooms, that hot tub, and the swimming pool at least weekly (for the rest of your life), you would be better off just spending the weekend at a nice hotel once in a while.  If you want the pool and hot tub to yourself, rent a party package at a local pool and don't invite anyone.  Besides avoiding the massive expense of a largely useless home, you also spare yourself the maintenance costs.  Likewise, instead of buying a house with a huge great room, you can rent one of the conference rooms at a nearby Marriott.  Unless you are having parties every week, it will cost less, and with the rental, you don't have to worry about the cleanup.  No one needs a big house to be happy.  For any major luxury item, renting as needed is almost always cheaper than buying, and doing without is even cheaper.  With this kind of financial sense, not only can your children be happy without being among the "elite," but they will also be much happier even if they do get lucky enough to join them.

Most people who start out poor or middle class and get rich don't do it because they are so successful in college.  They start with good financial sense.  Even highly successful inventors have died penniless (see Nicola Tesla, who largely invented the AC electric grid along with the electric motor).  Those who rise to the upper class begin with wise financial sense and either get rich starting businesses or investing.  Those who get rich through traditional employment still have to have good financial sense, otherwise they end up getting themselves into so much debt that they have to live like paupers in their extravagant mansions with their expensive cars.  Those who are not funded by rich parents all have one thing in common: They know how to manage their money and do without unnecessary luxuries.  If you want your children to be happy, teach them this, and they can be happy whether they get lucky enough to join the "elite" or not.