Stuart Zadel on The Millionaire Next Door Series. Economic Outpatient Care. It stands for children receiving financial assistance from their parents. Be warned.

ECONOMIC OUTPATIENT CARE

In your lifetime, you could accumulate somewhere between 1 and 10 millions if you have the right mindset and if you take action. Friends, the series of discussions I’m providing you right now are free and are proven to work. Still, without the right combination of mindset, habit, and action, these concepts will only stay as figments of your memory.

My name is Stuart, CEO at Zadel Property Education, and welcome to the fifth installment in The Millionaire Next Door Series.

The discussions featured in this series are inspired by the book, The Next Door Millionaire by Thomas Stanley and William Danko, in an attempt to discover what the wealthy are doing to get even wealthier.

REVIEW: FINANCIAL INDEPENDENCE IS MORE IMPORTANT THAN DISPLAYING SOCIAL STATUS

In the previous installment, you’ve discovered the fundamental difference in the belief structure of Prodigious Accumulators of Wealth or PAWs and Under Accumulators of Wealth or UAWs where financial independence is far more important than displaying high social status.

In this installment, I will talk about Economic Outpatient Care. That is, children receiving financial support from their parents. You see, what happens is when most people become PAWs, and they become parents, they feel compelled – even obligated – to provide financial support to their children. What happens when you do that?

Research shows that the more dollars you give your children, the fewer dollars they will accumulate. Conversely, the fewer dollars a child is given, the more dollars they will actually accumulate. So I’d like to say: “If you give a person financial crutch, you will give them a financial limp.”

You see a large number of people now displaying high socio-economic status. But what you don’t realize is they are supported by Economic Outpatient Care. These people are living a complete façade and it’s interesting to note that some of them actually even believe that their parent’s wealth already is their own!

RESEARCH STORY: THE AFFLUENT FAMILY

In over 46% of cases, according to the book, Affluent Families – a research conducted in the United States – parents admit to giving their children more than fifteen thousand dollars per year in cash gifts or the equivalent. But when surveyed, the children grossly underestimated the amount of money they were actually given. When the parents were interviewed, it turned out they gave a lot more than their children ever reported.

Now, the one caveat is the book does differentiate between parents providing for the financial education of their children. They often do pay for their children’s higher education, and many of these children go on to become self-sufficient professionals. However, the research does report that 80% of the cases where children did not receive one dollar or few dollars of economic outpatient care turned out to be earning more and they are worth more than those that did.

Andrew Carnegie, the one-time richest man in the world who inspired Napoleon Hill to write the all-time classic, Think and Grow Rich, said that parents totally wreck their children by giving them massive unearned wealth. He was often quoted as saying: “The biggest burden you can bestow any young man is massive unearned wealth.” I bet some of you still want to try it, don’t you?

Well, I don’t want to give out a million dollars. I want my children to make it. Why? First, you avoid that biggest burden. Second, most of them blow it anyway. And third, if they learn to make such money: one, they’ll value it; two, they’ll know how to make it, and three, they’ll know how to do it again. If they don’t want to stop at one, they may want to earn two or three if they want to accumulate more in this lifetime. It’s totally your choice – and theirs.

STORY: MARYANNE

You know I have a family friend, Maryanne. Maryanne is at the second highest level in one of Australia’s major banks. And I asked Maryanne one time: “Maryanne, who is at the absolutely top levels of your banks?” And, I wasn’t surprised when she told me: “Stuart, every one of them. They came from decent countries where poverty is prevalent. Every one of them had a massive desire – a burning desire – to create wealth and to make good because they grew up in circumstances that were anything but.”

INSIGHTS

To finish this discussion, I want to quote directly from the book, on page 167, where it says: “So the product of economic outpatient care, what happens when weakened children become adults? Well, they typically lack initiative. More often than not, they are economic underachievers but have a high propensity to spend. That’s why they need economic subsidies to maintain the standard of living they enjoy in their parent’s home. I’ll say it again: the more dollars adult children receive, the fewer dollars they accumulate. In contrast, those who are given fewer dollars, accumulate more.”

Add to that the following points:

• Giving precipitates more consumption than saving and investing. So parents thought their kids are going to do better or save and invest. They don’t. They spend it.
• Gift received is in general, never fully distinguished between the children’s wealth and the wealth of their gift-giving parents. They were already banking on their parent’s money being their own.
• Gift-givers are significantly more dependent on credit than are non-receivers.
• Receivers of gifts invest much less money than do non-receivers. You see, these people found out, it’s much easier to spend other people’s money than it is to spend self-generated money.

You know what? I consider myself fortunate to have grown up in what you call a ‘middle-class’ family where my father actually had two and, sometimes, three jobs most of his life to support his family. My mum was supporting three children, worked permanent part-time for 43 years in her life. And you know what, by default, my parents taught me the pride of ownership follows pride of ‘earningship.’

Watch the entire Next Door Millionaire Series episodes here.

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