Mistakes We Make with Our Children about Money
There’s nothing more disturbing to me that watching some of my clients feel obligated to take care of every financial need their child has. I’m not surprised by this behavior, however, because I think it stems from a cultural expectation that began with the Baby Boomer generation around the end of World War II. It’s my belief that young couples who began having children around this time would have been young adults during the Great Depression, 5-10 years earlier. In those youthful, pre-marriage years they had vowed not to live like their parents had during the Depression and decided they were going to give their children everything they possibly could financially. So, the Boomers and those who followed them were conditioned by their parents that they could have anything they wanted and that it was their parents’ job to give it to them — everything from their first car, to a college education, to a lavish wedding, to a first house.
So what’s wrong with this picture? Let me sum up:
1. It teaches entire generations to hold their hands out in expectation, as if their parents and the world owe them something — in short, it creates selfish people.
2. Few people know how to be truly self reliant and resourceful anymore, not taking initiative to look for ways to solve financial or other problems because they’ve always had someone there doing it for them.
3. It perpetuates bad financial habits in the next generation, getting more people deeper in debt and further in trouble until entire economies, industries, and governments are affected.
4. It puts undue burdens on older parents who can’t retire because they have to take care of Bobby and Sally, who may still be living at home in their late 20s and 30s.
5. It causes problems for Bobby and Sally who have no clue how to manage their own money, which means they’ll be back to haunt mom and dad later…so much for not wanting our children to suffer by making sure they had everything they ever wanted and didn’t have to live like those poor saps during the Great Depression.
I must often to tell clients who come to me in a panic that they don’t have enough money to send their child to the college of his choice, or to give their daughter a lavish wedding. I have to take them by the shoulders and shake them a bit to wake them up. I try to point out the following: If you can’t take care of your own self financially, then all the worry about your kids is a mute point. It’s kind of like the oxygen masks on an airplane…in the event of an emergency you’re instructed to put the mask on yourself first, then on your child. It does your child no good if you pass out from lack of oxygen before you can help him/her. You have to have your own ducks in a row. Even if you desperately want to help your children and “hate to see them suffer,” if you have not planned well financially, you can’t, so the only thing to do is begin working on yourself. When I have gotten my clients under control personally, then I have them begin working with their children to avoid making the same mistakes with their kids.
I advise them to do the following with their children:
1. Start talking about finances.
2. When children ask questions, use those moments as a teaching opportunity.
3. Stop giving money to children until you and your spouse have your spending in balance.
4. Be careful how much money you give children if you are still in debt.
5. Be strong enough to let your children fall on their face financially; don’t deprive them of the chance to learn from their own financial mistakes. In my opinion, you don’t really love your child if you’re not willing to let them make their own mistakes.
6. Only help financially when you can still take care of yourself (remember, kids have more time to make up for foolish mistakes than you do; give your retirement to your children but plan on working at Wal-Mart the rest of your life; those are your choices). Be sure to give children terms and conditions that they will agree to uphold.
7. Be consistent in what you teach them; they learn by example.