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The Most Horrendous Financial Advice I’ve Ever Seen

Let me know in the comments why you think this article made me want to throw up.

Financial advice that makes me sick to my stomach

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Jason Hull, CFP®, was the co-founder of Broadtree Partners, a firm that acquires $1-5MM EBITDA companies. He also was the co-founder of open source search consultancy OpenSource Connections, a premier Solr and ElasticSearch firm. He and his wife FIREd (financial independence retire early) at 46 and 45, respectively. He has a BS from the United States Military Academy at West Point and a MBA from the University of Virginia Darden Graduate School of Business.

You can read more about him in the About Page.

15 replies on “The Most Horrendous Financial Advice I’ve Ever Seen”

Time has been really, really disappointing to me with every piece of “journalism” I’ve seen them produce recently. The interesting thing in all of this is that we might be experiencing natural selection, assuming these parents follow the advice. Heck, they just might because they couldn’t figure out for themselves that too much credit card debt is bad.

No where does it say “teach your kids how to write a budget” or “review weekly expenses with kids to ensure they’re sticking to their budget” or “teach your children to SAVE for what they want/need rather than buying it on credit”. This article just tells you different ways to get your kid a credit card rather than teaching him/her how to save money and live within their means. Awful article, just awful.

As Sandi says, I don’t like the author’s claim that we should abdicate financial literacy to the schools and the government just because some parents suck at it. The school curriculum doesn’t seem to be inspiring financial comprehension either, and I think the parents’ behavior (good or bad) is the key to developing kids’ financial skills.

I’m agnostic about the opinions on credit cards & mortgages. I have to admit that I’m guilty of both co-signing a credit card for a 13-year-old and of carrying not one but two mortgages into retirement.

Our daughter did fine with “her” card. Seven years later the company wouldn’t transfer her flawless payment history to her own credit record, so she’s moved on to her own cards (and the original company has lost both of us customers). Co-signing seems to be the only way to give a teen experience with a credit card while they’re still at home for parental “help” and (if necessary) intervention. A credit card offers a lot more protection (and fewer fees) than a debit card, too.

We carried 30-year fixed-rate mortgages (residence & rental property) into retirement because we felt comfortable covering them with my military pension and the tenant’s rent. 10 years and several refinancings later that’s worked out well. I would have hesitated to cover a mortgage from any other type of pension, let alone savings.

To quote Ramit Sethi, the biggest problem is that we use the term “financial literacy.”

I am curious why you gave a 13 year old a credit card. I get the advantages of credit cards vs. debit cards and understand the pragmatism of using credit cards (we use them too and pay off the balance as soon as we make a charge…who’s down with OCD?), but am surprised at the young age. It has worked out fine for you. Was it tied to your daughter having a job?

There are three types of people in our country:

  1. Those who never get out of debt
  2. Those who got into debt, learned the lesson, and never stepped in the quicksand again, and
  3. Those who never got into debt in the first place
  4. Unfortunately, there’s a cottage industry of making heroes of the second category, but has anyone actually seriously studied what it was that made the people in the third category wind up there? That’s what we should be studying and then implementing. I somehow doubt that “financial literacy” plays much of a role in it, particularly compared to self-control and delayed gratification.

My boys have had pre-paid cards from USAA since they were 7 and 8. There are no fees, and it’s easy to transfer money to the card when grandma sends a birthday check. I also automatically add $10/month for them to spend on toys, baseball cards, or gift shop knick-knacks.
Son #1 is a disciplined spender. His account gets into triple digits sometimes. Son #2 can’t wait to buy a new toy at Target asap. His balance is often single digits or $0.

I don’t know how I’ll handle credit with them yet. I agree that there is no good credit card debt (lol on OCD). On the other hand, I have 2 cards at 6%. If I needed to, that’s not a tough rate to pay for a couple months, especially as an unsecured loan.

As for the mortgage, I guess I’m with Doug. When they asked, I’ve told two families with military pensions to re-fi at a low rate for a long time. It’s more about cash flow and liquidity for them.
And Sandi sure hit the nail on the head there.

Have you tried the Stanford Marshmallow Test on them? I like the idea of giving them prepaid debit cards; however, even debit cards don’t activate pain centers in the limbic system like plain old cash.

With that in mind, why not try this as a thought experiment?

They get the cash set aside in an account. It can be an Excel spreadsheet for all that it matters. They then have to actually withdraw the cash (probably from the Bank of Dad since you likely use USAA for your checking and can’t just walk into a bank) when they want to buy something. Instead of framing the choice as have something now or have something later, you can frame the choice as “spend $X and get (toy, baseball card, whatever) now and get nothing later” or “spend nothing now and get (MOAR toys, baseball cards, whatever” later. BTW, I have an article coming out about the psychology of that choice reframing.

It would be interesting to see how they treated that, although you couldn’t then isolate one variable (paying in cash vs. reframing) as influential. Maybe you should split it into two experiments.

This is why I do not have kids. I’d view them as two-legged lab rats! 😉

You got the right idea, but I tried stuff like that and it was too much work, with the same results.
Even with the offer of 100% interest, #2 wanted stuff NOW. And #1 was getting too much ‘interest’.
It’s also really easy to say ‘no’ if they don’t have their card, or not enough money. Before, every trip to a National Park gift shop I had to spend money. Now I just check their balance on my phone and they are cleared hot to spend or not spend.
The biggest hassle is at the register. Last time at Target, a woman got behind in line me figuring as a guy I’d be real fast. It took longer than she expected because the boys and I all paid separately. I know because she told me.
You’re right about the mental aspect of cash, at least for me. I use my cards for everything; there is no amount small enough that I won’t charge it. It helps me track aggregate spending, even if sometimes I walk out of the store with no idea what I spent. If I need it, and it’s in my budget, who cares? But when I actually pay someone else to cut my hair, they only take cash. It’s only 11 bucks with a tip, but it’s definitely a different feeling to hand over greenbacks.

“I have CDO. That’s OCD with the letters in alphabetical order — just the way they are supposed to be.”

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