Want Money-Smart Kids? “You Must Remember This”
Guess what? Truly wealthy people cut coupons, plan purchases and budget, regularly. Americans first read about these revelations in Thomas Stanley and Richard Danko’s The Millionaire Next Door (“The Surprising Secrets of America’s Wealthy”) way back in 1996. This team is our final honoree in the “Financial Writers Who Inspire Us” blog series. Here is why even in 2016, as was famously sung in Casablanca, “The fundamental things apply. As time goes by.”
Despite the book’s popularity (over 3 million copies have been sold), The Millionaire Next Door has received a fair bit of criticism over the years. It’s central message has been reduced to an overly optimistic view of what frugality can accomplish. It won’t come as a surprise to our readers, that we disagree. We believe The Millionaire Next Door should continue to be celebrated for revealing the eye-opening habits that many truly financially independent people practice: cutting coupons, planning purchases and regularly balancing a budget. Stanley and Danko also made Americans widely aware of the fact that just because someone wears fancy clothes, drives a fancy car and lives in a fancy house, doesn’t mean they are wealthy.
At Gifting Sense we are turning shopping into a tool that helps parents give their children the best gift ever: financial literacy. Our Gift Surveys instill many of the habits that Stanley and Danko discovered millionaires employ in their day to day lives.
Some say the book is out of date because society has evolved; Millenials are consuming less than Baby Boomers. We aren’t sure this is entirely accurate. The car might be electric, the house more energy-efficient, the trip more socially conscious, and the clothes less formal, but people are still spending more than they have, to wit historically high debt-to-income ratios. When Stanley and Danko first wrote, it was a lot harder to buy things you didn’t have the money for. Financially un-savvy folks spent all their money and saved very little – but borrowing just wasn’t as available as it is now. Today, it is actually pretty easy to spend not just all that you make, but more than you make. Others say the book is out of date because modern-day career paths didn’t yet exist when it was written. Read the last two chapters, “Find Your Niche” and “Jobs: Millionaires Versus Heirs”. There is gold in these pages, that applies even to today’s world where the speed of change feels unparalleled.
Stanley and Danko went into their project thinking they would discover an entirely different set of behaviors than the ones they did. We like their book for this reason as well. Why? Because as we wrote last October, Gift Surveys are a very effective “head-fake”, a great way to teach kids one thing while they think they are doing another. Sure kids use our process in service of getting what they think they want. But what they are really getting, are some great habits, like calculating the cost-per-use of a potential purchase, or working out if a gift really makes sense, before they ask for it.
If your kids complain that “no one else has to ask for their gifts using Gift Surveys” – just tell them that you recently re-read a 20 year old book and know for a fact that they are only walking in the footsteps of Millionaires before them. If they persist, regale them with some of the most enduring lyrics ever written. Even the most digital of us reaches an age where it becomes just about impossible to deny – that despite the speed of new invention “…The fundamental things apply. As time goes by.”