Get A Job and Buy A House, Right? – WRONG!








So folks, we delve again into another ancient Jewish discipline that is so diametrically opposed to what we normally teach our children. This one was a real revelation for me.


We normally encourage our children to become educated as soon as possible, get a job, buy a house, settle down, have kids etc etc. Our sons and daughters who follow this order of life are deemed as sensible and wise – and so they are.  Well, that regime is not deemed wise with Jewish folk – well at least not the ‘buy-a-house’ part of it anyway. Here’s how smart Jews do it differently.


My good friend Kathy gave me this beautiful chook book.


If you were in a wise Jewish family you would have taught your children from tiny about the Jewish Jars (a post for another time) and every cent they would have received for birthdays, Purim, Hanukah etc would have had 20% taken out and popped away for investment – small coinage really, but instilling a vital wealth-principle from very early. As soon as Jewish children get their first part-time job in a call centre or as a casual part-time intern in a law firm or start their own micro-business etc (yet another Jewish insight for another post – AKA suitable jobs for young people) their parents and community then actively encourage them to have (as a minimum) a 60% savings rate i.e. spend 40% and save 60% of the earning from their part time jobs.  So, whilst Jewish children are at high school and university they are actively socking away 60% of their part-time earnings until they finish their studies and get a full time job.  This represents a 60% savings rate of their own money from the age of approx 16 through to 22 when they finish their studies. It is entirely reasonable, possible and normal for a Jewish child to have socked away at least $50, 000 dollars in this 6 year period.


Home cooked meals - save a fortune


Oh!  A deposit on an entry-level house you say?  No. Wrong. That $50K is invested and not touched nor actively added to besides methodically reinvesting earnings from it every quarter. When that Jewish child is old, there will be at least $1.2 million dollars sitting there quite aside from any other financial or life decision they have made since the age of 22. Over $ 1.15 million of this is passive earnings. Jews totally understand and leverage the vast power of time. Time can only be truly utilised by the young.


So at 22 years old, with their degree done and dusted, 6 years of solid work experience notched up, a full time job, a future $1.2 million dollar nest egg already cooking, Jewish children start their adult life just like all the rest of our children. The hidden and unspoken difference is that they are already wealthy in their own right and by their own work. Yes, they will marry, get a mortgage, have kids, travel, have hobbies, have ups and downs, get sick, chase a career, have wins and losses just like the rest of us – but as mere adolescents they have already amazingly taken care of their basic financial future.


Prep two meals at once - frugal much

In short – wise Jewish families facilitate their young people to invest UP FRONT before they start their adult life in earnest. Wise Jewish children start life with their wealth predetermined by their own habits, with their own hard-earned money and supported by a like-minded community. By 22 they are already seasoned and habitual savers, skilled in basic investments, old hands at delayed gratification, practiced frugalistas and….wealthy.

How’s our 22 year old children by comparison?


This principle blew my mind when I found out about it. I stumbled across it in a journal which benignly stated that Jewish families prefer their children to invest early in life before committing to home ownership … my mind instantly snapped ‘on’ as if someone had just switched a huge floodlight on and I instantly researched deeper. Astounding. Practically any teenager can do it. Any parent can support it. It is so profoundly simple too. Why hadn’t I thought of this myself? Gosh.


Take care folks and stay nice of course.

Mr HM (Phil)


Comments

  1. You know Phil, I kind of have thought of this in my own small way, without knowing anything about Jewish beliefs. I've had many conversations in the past couple of years with my kids along similar lines, maybe it will sink in, I wish someone had made such suggestions when I was young!

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    1. I certainly could have done it as a teen too - oh well.

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  2. I love how this Jewish principle would work!

    You could have informed us of this earlier Phil lol! I will have to work on my grandchildren now :)

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    1. Certainly work on the grandies Tania - make it cultural and reward it with love and praise.

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  3. I'm way past this and so are my children. Like Cheryl said, I wish my parents had had this insight. I guess we can only do what we can do...
    Debbie

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  4. How does this system of savings work when there is only .01% interest? Laura

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    1. Hi Laura. I suppose you are referring to a basic interst rate on a bank account? (not exactly sure where you are getting .01% from). Money in the bank is NOT an investment unless it is earning more than inflation. I recently wrote a post on the basics of investing, how to and where to. A basic investment must aim at averaging at least 7% to be an investment. This can be done in stocks, ETF's, LIC's for starters. Does this answer your question?

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  5. What a great thing to teach young adults. It's equally impressive that the children are receptive to this and can keep their hands off the money. When I worked as a teen, I had to put X amount away for college (i.e. most of my money, lol). The rest I just blew on junk food and clothes.

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    1. It takes a whole community supporting it and praising the action to make it work at its best.

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  6. Hi Phil,

    I'm wondering do Jewish parents help their kids with the cost of university, buying their first car, accomodation during uni? I put myself through uni as a young person and my savings rate was zero - there wasn't enough money for any sort of social life, a car or anything else, it all went on rent, food, transport.

    I do think socking away a large sum of money makes complete financial sense, but given the cost of housing in our cities and even in large country towns these days I have encouraged my kids to buy property ASAP as housing prices just keep going up. I also wonder whether these savings rules are pre-compulsory super? If most Jewish people study for a good career or go on to run successful businesses do they really need an extra 1.2 million in savings?

    Not trying to play devil's advocate here, I am just genuinely interested in all the facts as I have two kids on the brink of adulthood. My oldest is still at school and has saved over $9000 for a car. I'm wondering in a Jewish family, would that money be invested and mum and dad provide the car?

    Madeleine

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    1. You raise a fascinating set of valid questions. Firstly, Jewish folk love cities....cities are the source of all commerce and life can be very efficient. So within a city children do not need cars they leverage public transport. Cities also provide excellent job opportunities for young people (not MacDonalds or coffee shops) in call centres or other office roles that pay better than minimum rates (often in companies that a relevant to their chosen studies. They study at local universities and live at home - living away for university is only for the unashamedly wealthy. Their social life is fully catered for by the wider community and the synagogue. Jews never live in isolation - their social connections and family circles are epic and purposely created and fostered. As a rule, Jewish parents do not overspend on their children (of course there are exceptions). Superannuation is seen as a tax rule not a serious investment so never factored in to the equation. That "1.2 million" allows Jews to take risks, be entrepreneurial, do things differently and be innovative knowing that they are not squandering future family income if things do not work out. There is so, so much more to discuss on this topic but hopefully these extra points help with ore to think about.
      Oh, that $9000 .... if it gets spent on a car that is the last you will ever see of it. Catch the bus, the train or bike it. Cars are a bottomless black hole of expense. That $9000 is actually worth $200K at retirement (aside from Super) if invested and never actively added to.

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  7. Thanks for your response, Phil.

    Clearly I've made a big mistake moving to the country! I left Sydney 20 years ago for a quieter, simpler life. But for all it's advantages I can see from what you are saying that city life has some clear financial advantages for young people starting out. We have a university in my town, so my kids could live at home and study here - but it will depend on what they want to pursue.

    Living without a car here is out of the question if you are working and/or studying due to a complete lack of good public transport. There are few buses and literally ONE train a day!! And it goes to Sydney....

    If my kids choose to settle in the country as adults at least they will save money on housing. I think the median house price here is about $360,000 whereas in Sydney I believe it's now about 1.15 million. If the money saved is invested, they could end up very comfortably off indeed.

    So much food for thought, thank you for sharing these interesting ideas :-)

    Madeleine

    PS I hope frugal habits of the Jewish is coming soon, this whole topic is fascinating!

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  8. Very interesting Mr HM. Peoples circumstances are so varied though aren't they? When I was a teenager I used to take on baby-sitting jobs. My mother took all the money I earned. When I started working I lived at home and the board I paid was at least tripple the amount my co-workers and friends paid. When I was in my early 20's I discovered my mother was behind in her mortgage and rates payments, (she was a very poor money manager) so I took those payments on in order to save her home. Later I went on to support other family members. I was in my forties before I was freed from these types of circumstances.

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    1. Have you ever read Helen Forrester's series of books about her life? Your comments here echo her situation exactly.

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  9. Wow, love this principle. We have tried to instill a similar in my stepchildren, with no success. They prefer to spend any income left over after covering their car expenses, telephones and clothes (they still live at home) on leisure activities. Their loss, as I fully intend to spend my savings in my retirement years, so they best not be counting on us, just as I don't count on my parents leaving me an inheritance that will sustain my retirement years.

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    1. Keep chipping away at it Lyndie....the penny may just drop eventually.

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  10. Fascinating post. I love how this strategy can remove many of life's stresses from your kids. Glad I read it while my son is still young enough to benefit from the knowledge.

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    1. A big part of the success of this is to make it a cultural thing in your family

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