Thursday, February 23, 2012

I can't believe that guy blew $150,000 in less than a year! Well, you shouldn't be surprised.

Once, there was this young, athletic married couple.  They had a little boy together and loved him more than life itself.  The little boy was obsessed with basketball.  So when he was about 3, his parents gave him one of those half-size basketballs.  He loved it.  It's all he played with.  Eventually he could dribble like crazy, all around, through his legs, off the walls and furniture; he was really good.  For whatever reason though, his parents never got him a full sized basketball.  He didn't really mind though.  He had plenty of fun with his little ball.

Then one day, he won a contest on the radio.  The prize was to get to play a half-court scrimmage with the LA Lakers. He was very excited to show off his skills to some pros.  I'm sure you can imagine his disappointment when he was handed a full sized basketball.  Needless to say, he wasn't very skilled with the full sized ball.

But that was to be expected.  How could a person be expected to be very good with a basketball if they've never really had one?

If a person never had a car, could they be a very good driver?
Maybe, but they need to eventually get a car to make mistakes with before buying a Ferrari.

If a person has never owned a guitar, could they be a very good guitarist?
Maybe, but they need to make a lot of mistakes before they'll really be any good.

If someone has never had pots and pans, they're not going to be a very good cook.

If a person has never had much money, could they be very good managing money?

Our culture fosters a notion that one should shelter their children from cash-money and the freedom of choice it provides.  That money should be earned through toil and strife and THAT is the only way for an individual to "learn the value of money".  When giving to a child, we are taught that it is somehow wrong to give them straight cash.  For some reason it is "better" to give the child actual products and things.  Somehow that is supposed to teach the child how to handle money and protect them from the debauchery that would ensue were they presented with just money and the responsibility and power it carries with it.

I'm sure my point is beginning to become clear.  The social norms surrounding the acquisition and handling of money by youth and young adults almost ensures that should they ever come into a significant sum of money, they will grossly mishandle it; due to the fact that they have no experience handling large sums. 

I'd love to find some billionaire to run an experiment.  Select ten 21 year old college students and give each of them $100,000 to use as they so desire.  I guarantee that long term productivity of the gift would be directly related to their prior experience managing significant sums of money.

"So what?" you might ask. Well, give your children money; as much as you can.  If you're going to buy them a car, give them the money and teach them how to find and select a car.  Then let them do it themselves. Don't give gift cards, give them cash.  Let them learn.  Let them squander money.  Help them build capital (if they want).  Support their ideas with MONEY.  And most importantly, LET THEM FAIL.  And let them try again if they show progress in averting previous downfalls.  Or whatever.

The right thing to do is gonna be different for everyone. I'm no guru, but I can assure you, if you have no experience doing something, you're probably gonna SUCK at it and that includes managing money.

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