Are your kids relying more and more on the BMD (Bank of Mom and Dad) as they grow older? Does it seem like you are constantly dipping into your pocket to help out your teen or young adult? Why does it seem like they have no real understanding of what it takes to run a household, pay bills, save for the future and earn a living?
Often it’s because they’ve never been taught basic financial management skills. Giving them a piggy bank should not be the extent of their education. Money sense is rarely something they magically acquire as they grow older. The topic is not high on the curriculum list at schools, yet it is an essential skill if we expect our children to grow into financially responsible, independent adults. It’s also easy to blame our schools for the lack of emphasis on this subject, but to be fair, as parents, the onus for life skills education ultimately falls on us.
Some suggestions on how to help your son or daughter grow financially:
- Introduce them to the reality of family finances. Show them your monthly bills, show them your paycheque and talk about the difference. Explain how you budget to meet expenses. Let them figure out, using real numbers, the state of family affairs. (This suggestion is sometimes met with horror by parents, which may mean their own financial management skills aren’t that great. Or, that it’s none of their kids’ business. If this is the case, use it as the learning experience it is, and get your whole family involved in creating realistic ways to live a more financially responsible life.)
- Many teens are given credit cards, but don’t know the first thing about compound interest on carryover balances. New rulings make credit companies list the actual number of years it will take to pay off a balance if only minimum payments are received. Go over this principle with your teen to make sure they understand it. And remember, if you co-signed a credit card application, you are responsible for any defaults in payment, so it’s in your best interest to help them establish good use of credit. One rule of thumb is that if they can’t pay off the purchase when the bill comes in, they can’t afford it.
- Find out what the school does or doesn’t teach them. Junior Achievement is willing to offer excellent money management programs to middle and high school students. If your school hasn’t tapped into their Dollars with Sense program yet, learn more here. Suggest it to the principal as a great resource.
- Go online. Many major banks offer special accounts and savings programs for young people and pages of great advice. The Huffington Post recently posted Financial Advice for 20-Somethings that’s well worth a read. Share these resources with your young adults.
The biggest drawback to helping a teen become financially responsible is often our own attitude about money.
If your child sees you splash out cash for instant gratification purchases, or hears you groan when the Visa bill arrives, you’re sending a message about your own (not-so-hot) financial management style. Ditto if you are so tight with money that you squeak if any leaks out. Learning that spending is a bad thing is just as wrong as overspending. A well-balanced approach is what it takes.