“Economic outpatient care refers to the substantial economic gifts and ‘acts of kindness’ some parents give to their adult children and grandchildren.”
Another interesting finding from authors Thomas Stanley and William Danko is the contrast between the average millionaire and his/her children and grandchildren. The average millionaire went to public school, came from modest means, and did not receive monetary help from his/her parents. They are frugal (as outlined in previous posts), that’s how they became wealthy! But after they become wealthy and have children, their spending habits change.
For some reason, the millionaire parents spend lots of money on their kids, not giving them the same upbringing they received. The authors muse that perhaps the parents are ashamed of their humble upbringings, or they just don’t want their children to go through the struggles they did while growing up. Either way, the millionaire parents end up giving lots of money to their children, well into their child’s adulthood, in what the authors call “economic outpatient care”.
“These parents feel compelled, even obligated, to provide economic support for their adult children and their families. What’s the result of this largesse?…In general, the more dollars adult children receive, the fewer they accumulate, while those who are given fewer dollars accumulate more.“
Now, the authors do state that some monetary gifts are good for children: tuition, money to help start businesses. In other words, investments in the child can have positive effects on that child’s ability to become financially independent. But cash handouts are what make children of the affluent dependent on their parents’ affluence.
In my next post I will outline some of the guidelines The Millionaire Next Door gives for wealthy parents trying to raise children without spoiling them.