Money Management: Are Mega-earning Youth Receiving Too Much, Too Soon?
March 18, 2011I read this article about Billy Ray Cyrus’ concern for his daughter Miley. (I have a daughter, so you shouldn’t laugh at me for knowing who Hannah Montana is and being caught up in observing her personal drama.) She isn’t the first, nor will she be the last child star to earn a fortune. There seem to be more stories about “child stars gone wrong” than there are about those who have taken their fame, celebrity and wealth and done something good for themselves and their families. Maybe it’s that only the train wrecks get reported – it’s not newsworthy when someone helps others or fades from the spotlight into a well balanced adult life, but that’s a different topic for a different blog. While reading it, I started to wonder if the whole combination of youth and wealth is a poor one.
Young singers, actors, and entertainers of all kinds are in the news recently for all the wrong reasons – arrests, bankruptcies, houses in foreclosure, etc. My daughter keeps me informed about the world of celebrities and how their financial lives often go wrong. With so much money being earned by people so young and talented, the average American adult has to wonder, “What happened to all the money?” And that is where the adults surrounding these young people often fail. As a parent or manager/agent or advisor to a mega-earning youth (and I define youth as anyone who was born after I graduated from high school or college, wow time really does fly), it should be incumbent upon that person to create a structure that provides for the next 60-70 years worth of living, not just until the next contract is signed.
Having too much too soon can be incredibly harmful. I know that if I had been given a multi-million dollar recording contract when I was young (anyone who has heard me sing is laughing hysterically right now), it’s likely that I would not have been exactly wise with the money. And as a believer in capitalism and free markets, maybe there needs to be some kind of structure in place for the super-earning youth. If Disney had not paid Miley Cyrus in virtually unlimited quantities, maybe using long term deferred payment arrangements rather than lump sums today, a problem could have been avoided. Recently, I met with the wife of an entertainer who had several hit songs in the early 90’s, received millions of dollars for those hits, and spent the money and today is being supported by his wife while he tries to write new songs and resurrect a once promising musical career. They own all of their property individually so that her assets are not subject to his creditors or his unpaid tax liens. I think that the agents, parents, and advisors of these young people are doing them a huge disservice. Maybe the whole concept of paying huge contracts up front to young entertainers should be revisited to see if there is a feasible way to take some of today’s up front money and convert it into smaller lifelong income streams to enable them to become wiser and more able to handle success. Movie studios, television producers, record labels, etc. might just need to do business an entirely new way in order to protect the talent that drives their business.
With huge contracts, the young and talented have what seems like unlimited resources. With unlimited resources (or what appears that way at the time), there is no need to develop good habits or increase their financial knowledge. The good news for the rest of us is that we don’t have huge contracts that we can squander! Our paychecks aren’t that big. (Am I really saying that’s a benefit?) We are forced to develop our knowledge base and financial habits or it will take us a whole lifetime to waste the resources that a young talented person can waste in just a few years.