One of our daughters called from college the other night. "Dad, can you buy me some stocks?" she urged.
“What?” I asked. “Why?’’
Without hesitation, she said, “I really need to make some money.”
With even less hesitation, I said, “How about working?”
We both understood the issue, but came up with different solutions. Both could accomplish the goal, both would teach lessons and both would result in some unintended consequences.
Earlier this month, the New York Times published a story headlined: "Animal McMansion: Students trade dorm for suburban luxury." The article talks about how some students at the University of California, Merced, are renting luxurious homes in overbuilt areas close to campus. The costs are lower than campus housing and they can study from their Jacuzzi or in front of a gas fireplace. My own college accommodations had me figuring out how to control the cockroaches rather than how to control wine-cellar temperatures.
There are certainly things about this arrangement that are appealing. The homes are safe, large and comfortable. The rent is reasonable. But what happens when kids start at the top? Does it set them up for disappointment?
There may not be correct answers to these questions, but they still matter. In making money decisions, we often need to hold disparate truths up to the light and think about what we want for ourselves, our kids and our society.
One of our clients' children was wondering how much home they could afford. That calculation is easy; what's more difficult is getting to the questions about whether they want to continue to live in the same area, whether they want to be tied to a job that they are not enjoying, and whether they want the benefits of homeownership and can accept the inherent inflexibility. Owning can be wonderful, and it can be a drain.
One of the problems with multiple viewpoints in financial planning is that they often lead to obstinacy. We constantly work with couples who see things through their own (legitimate) prism. And they don't necessarily see the same things. They look to us for what is right when they really need to look to each other to determine the areas on which they can find agreement. Couples often become caricatures of their own positions. A spender married to a saver, for example, actually spent more because the spender was not sure when the spigot may be turned off. By avoiding the issue, the couple exacerbated it. The spender may never become a saver, but, through conversation, both parties moderate.
In her book "Grand Pursuit: The Story of Economic Genius,'' Sylvia Nasar described the great innovation of the 1920s and 1930s -- "the economics of the whole,'' which taught that what was good for one nation might easily be bad for all nations.
But this is also true of families, corporations and societies. We impact each other, which impacts society. Part of the reason the housing bubble occurred was because of easy credit. But it was also people's wants and desires that prompted them to use the credit. It's not just the price and the availability of credit -- it's also the wants, which are often influenced by what others have. We are not obligated to think about how our spending impacts others, but it has an effect.
One of our clients created a matching gift to a charity that inspired people who had not given before to become new donors. This certainly served that particular charity well. But unless these new donors increased their overall giving, money may have been displaced from other charities. Awareness is the tool for handling multiple truths.
Spend your life wisely.
Ross Levin is founding principal and president of Accredited Investors Inc., Edina. His Gains Losses column runs on the last Sunday of the month. His e-mail is email@example.com.