The 10th Man

Financial Codependence

October 18, 2018

The goal is to be financially independent, right? By “independent,” we mean: not dependent on another person or another entity for our financial well-being.

When we are children, we are financially dependent on our parents. At 16, some teenagers will get jobs and achieve a degree of financial independence, although that is less and less common. Most children remain financially dependent through high school and into college, where parents are chipping in for tuition, room and board, and even living expenses.

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It doesn’t end at graduation. Lots of young people are getting financial assistance from their parents well into their twenties and thirties, even after getting married and having children of their own. The adult children never achieve financial independence—they remain wholly reliant on their parents, well into adulthood. That’s unfortunate.

I will tell you a story. The main reason I went to the United States Coast Guard Academy for college is because it was free. And that mattered, because in my senior year of high school, my divorced mother told me point blank that she wasn’t going to pay for college (above and beyond in-state tuition for the University of Connecticut).

So, at age 17, I took matters into my own hands. I set myself on a path where I would never be financially dependent on another person again.

Yes, the service academies are free—but not really. The old joke about the Coast Guard Academy is that you get a $200,000 education shoved up your ass a nickel at a time. It was arduous. It was not fun. I went through a lot to get a free education. And I carried a resentment against my mom for years. But you know what?

It was the best thing for me.

I have been successful. I am not stupidly rich, but rich enough to have outdoor speakers playing my favorite house music when I am out in the pool in the summer. That makes me feel rich. My success has been entirely my own success. Nobody had a part in it. It is an indescribable feeling, doing it all yourself, without any help. I take a lot of pride in it.

It wouldn’t feel as good if I had parents who were paying for everything along the way.

So the goal is to be financially independent. And that’s a good goal because of the feeling you get when you get there. It feels great to do it all yourself. Financial independence is true independence—you don’t owe anybody anything.

When You Owe Somebody Something

Things are different nowadays. You have a lot of parents who are deeply financially entwined with their children.

I see parents do this to their own detriment. They give money to their kids that they can’t afford to give, wrecking their own financial well-being in the process. You ask them why they do this, and I have heard the answer more times than I have seen Ocean’s Eleven. They say: “Well, my kids will be taking care of me when I get older.”

That isn’t financial independence. It is financial codependence. In this lifetime, you get one shot to be happy. If you are guilted or coerced into financially supporting your parents in retirement, then you missed your shot.

Codependent relationships are dysfunctional relationships. The term “codependent” comes from the world of addiction treatment. The Wikipedia definition is: “A dysfunctional helping relationship where one person supports or enables another person’s addiction, poor mental health, immaturity, irresponsibility, or underachievement.”

It’s a system where nobody experiences the consequences of their own actions. If the child spends like an idiot, there are no consequences. If the parent spends like an idiot, there are no consequences.

I am a big fan of people experiencing the consequences of their actions. Otherwise, nobody ever learns.

So what is acceptable? Is it acceptable to pay for your kid’s college education?

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The answer is: only if you doing it unconditionally. And even then, not a great idea.

But I’m willing to entertain the thought that the world has changed and that children are not truly emancipated at 18 anymore—adulthood doesn’t arrive until age 22. Is it unfair to foist four years of a mountain of college debt upon a young person, when financial aid decisions are made based on the parents’ income and assets? It probably is.

Pay for college for your kids if you like. Tuition, room and board, books, but not living expenses. And your obligation ends there. If you’re cutting checks to your 28-year-old underachiever, it’s not just financial stupidity, it’s emotionally unhealthy.

The best gift you can give to your children is the ability to succeed on their own.

One Year On

This week last year, the very first issue of ETF 20/20 was published. At the time, I said the point of the newsletter was to help people become successful, long-term investors using ETFs… and to get rich in a slow, deliberate and sustainable way.

I’m happy to say we’re nailing that mandate. I believe that ETF 20/20 is hands down the best ETF portfolio service out there, and that it takes care of your core portfolio needs. To all the ETF 20/20 subscribers reading this—thank you for your support.

In many ways, the launch of ETF 20/20 was one step in what I’ve always wanted to do: help individual investors. The shift to personal finance in The 10th Man has been a second step. But I’m working on another big step right now, this one for those of you looking for a more active, aggressive service. The adventure continues.

Some changes are coming—good changes. Stay tuned.

Jared Dillian