Money ' the Quiet Teacher

By DAVID MOON, Moon Capital Management
June 19, 2005

A week ago, this paper published an article describing how affluent families deal with issues of money and wealth. The article describes a rich uncle who is disgusted seeing his nieces and nephews spoiled by easy access to family money.

After years of working with families, I've seen children with various levels of maturity regarding money. I have to disagree with the well-intentioned uncle. Money does not spoil people. Neither access to money nor the money itself is destructive or evil. Money is simply a tool, no different than any carpenter's tool. Like a hammer or saw, money can be an instrument to build something worthwhile and useful. Also like a hammer or saw, if used improperly and without care, money can be dangerous and destructive. We would never give our kids a chainsaw without proper instruction and demonstrations. Yet we often send our kids into their adulthood with very little instruction in how to use financial capital, an incredibly powerful ' yet potentially dangerous ' tool. Most of what our kids learn about money is a result of watching their parents. Unfortunately, the examples we set are often dysfunctional and dangerous.

The late Edwin Friedman was a rabbi, therapist and author who frequently taught on the relationships of different components within certain types of systems, including families. One of his observations is that an individual seldom develops beyond the maturity level of his parents or mentors. It's hard to be well-adjusted as an adult - in any area of life - if you've never seen how a well-adjusted person acts. How we deal with money is no exception.

There is one thing you can do to guarantee that your children will be materialistic or use money to try to manipulate people, including themselves: be materialistic or use money to try and manipulate people. Do that and you almost guarantee that your kids will do the same.

Using money to manipulate yourself is no different than trying to manipulate others. Do you head to the mall when you need to shake off a case of the blahs? If so, you are teaching your kids that money can be used to change a person's state of mind. Don't be surprised if that child becomes an adult who tries to find happiness in an expensive sports car or in trying to keep up with the Joneses. If you bribe your kids with promises of toys or cash, they are learning that money should be used to manipulate others. If money is the deepest core value in your home, it decreases the odds that your kids will understand the innate value of doing the right thing; your child will misbehave once he loses the opportunity for a reward. This behavior will continue into his adulthood.

Talk about money, giving, investing, saving, and budgeting. Let them see you do it. (Of course, to accomplish this, parents must budget, save, invest and give to worthy causes.) If parents use money as a tool to reinforce a set of meaningful, positive values, their children will see it. With that example, kids are more likely to have a set of similar values that influence all of their decisions as adults, including how they use money.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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