Parents and kids adding $100 bills to pink piggy bank

The Big Mistake Millennial Parents are Making

Why financial struggle is necessary for success

I’ve been hearing more and more about an interesting trend: parents paying down the cost of their children’s debt.

Whether it be student loans, home down payments, or living at home because of credit card debt, parents of millennials are footing the bill—or at least significantly helping pay down—for their kids’ big debt costs.

On one level, I can understand this impulse. Parents naturally love their children and want to help them start life on the right foot. And the high levels of debt that most young people have, along with low salaries and poor job prospects, make it very tough for them to get ahead.

But I believe that footing the bill for your kids actually hurts them more than it helps them.

The pain of financial failure

My first business sold nylon and Velcro surfer wallets. We worked out licensing deals with famous rock bands and put their logos on the wallets. They sold like hotcakes and the company grew very quickly. But I made a huge mistake.

My attorney told me that I should patent my idea. When I heard that it would cost $10,000 to do so, I said no way. Soon another company came along and copied my idea, cutting into my market share. On top of that, I had a number of distributors who owed me money but were not paying. Soon my company was in dire straits and I decided to meet with my rich dad.

What I hoped to get out of the meeting with rich dad and what I got were two very different things. My hope was that rich dad would show me a path forward to save my business—and maybe even to offer some financial support.

Instead, rich dad looked over my financials, stared me in the eyes, and said, “Your company has terminal financial cancer. You have grossly mismanaged this business and it can’t be saved.”

In my arrogance, I tried to convince him that he was wrong about my business, but deep down I knew he was right. Eventually, I had to liquidate my business. In the process, I went $1 million in debt.

The pain of this financial failure was very acute.

Digging out of debt

Soon after that, I met Kim. I didn’t think this beautiful woman would want to be with a guy whose business just failed and was $1 million in debt, but we fell in love and she stuck with me.

Together, we worked hard to build a new business centered around financial education—at times living in our car or on friend’s couches to make ends meet. We both knew we didn’t want to simply go and get a good job. We wanted to build a company and we found our purpose in life. That clarity of vision allowed us to make the many sacrifices we needed in order to achieve our goal.

Eventually, Kim and I paid of the $1 million in debt and built a successful business. Along the way, we learned invaluable lessons not just about money but also about ourselves.

The pain was necessary

The easy path for rich dad would have been to placate me, sugar coat his assessment of my business, or even to give me a loan to see if I could turn it around. Any of those options would have done me a huge disservice.

Ultimately, it was rich dad’s hard words—and the hard years that came after them—that led to my success later in life. I can confidently say that had it not been for the hard truth that rich dad gave me, I would not be where I am today.

The financial pain was necessary for me, and it’s necessary for your kids.

How to really help

The easy way out for parents is to pay for their kids’ expenses and debt. The hard way forward is to watch them struggle financially while working with them to build their financial intelligence.

Rather than foot the bill, I encourage all parents to invest in their children’s financial education. Don’t pay for the debt, but do take them to a seminar that can change their perspective on money and the world. Spend time rather than cash to go over their financial statements and coach them on how to make better financial decisions. And be there when they need a shoulder to cry on.

Only by owning their own financial future will our children grow to prosper and thrive in a world where it is increasingly hard to financially survive.

Where to start

The good news is we have many resources to help you do this. Start with going over the new rules of money:

From there, I encourage you to read and study Rich Dad Poor Dad, which has just been released in a new and updated edition, and take the time to play CASHFLOW together, which was created to put the rich dad principles into real world simulation. You can play online for free.

Once these foundations of financial intelligence are in place, you can then begin advanced work with a coach, as well as attend specialized workshops and seminars. And best of all, you can formulate a plan to even invest together.

Kim and I started the Rich Dad Company many years ago precisely because we want to see you and your kids enjoy the financial success that comes from the lessons handed down to us and learned along the way. Why not start today?

Original publish date: July 18, 2017