A relatively new social condition is the phenomenon of adult children demanding, and
receiving, financial support from their parents well into their twenties and thirties.
Baby boomer parents are beginning to reap the problems created by overindulging and
overspending on their children. Money management is complex and it gets even more
complicated when it is tied to family matters. Jim Frannea, President of Consumer Credit
Counseling Service in Orange County, California has noted a significant rise in the number
of young adults seeking debt counseling (18% of CCCS’ clients are between 18 and 25
years of age). Their average debt is $15,000 and their average number of creditors is
eight, not counting student loans.
The human cost of these
statistics cannot be over estimated. Vast numbers of young adults are starting their
careers deeply in debt. Just imagine, being 23, bright and capable of building your dream
but desperately in debt. I remember a young man I interviewed on my radio show. He
graduated from college with a huge credit card debt (mostly to fly home for holidays) and
staggering student loans. He got an entry-level job upon graduation and began to build his
resume while struggling to pay his current expenses and past bills. Six years later he got
his first good-paying job and he began to address, and reduce his debts. I estimate that
he will be well into his thirties before he is completely debt free, even if he never
charges another thing. What a sad way to begin. I wondered what his parents had taught him
about money?
I wonder what he will teach
his children. How do parents teach their children money values in a consumer credit-driven
society? What is the impact on parents of adult children who still need to be fed
financially? Jim Frannea is a expert in credit counseling. He is dedicated to helping
people to achieve financial well being. What follows are his answers to some very
important questions.
Q. When should a parent
begin to close the Bank of Mom and Dad?
A. I suggest that parents
begin teaching money values to children as young as six years old. The financial habits
developed by children are carried out as they become adults. If children are given
everything they want until they are young adults and then suddenly the well goes dry, the
parent/child relationship suffers. Most adult children feel anger, betrayal and resentment
when the Bank of Mom and Dad runs dry.
That reminds me of a story
about a client, his wife and her father. His wife’s Dad overindulged her. While
courting, her Dad even paid for some of their more lavish dates. But, all the while he
kept telling her that "the day you are married, I am finished and I will no longer
support you." When she got married he gladly paid for an elegant, expensive wedding.
Then, true to his word, he refused to help this struggling young couple with a single
penny as her new husband worked relentlessly to establish himself in his chosen
profession.
This feast or famine
dynamic created all kinds of problems for this young couple. They survived, however, and
are now doing quite well, but their stress and heartache is not easily forgotten,
especially when attending family events.
Q. What should a parent
do when their child makes poor money decisions?
A. Children have to be
allowed to fall when learning to walk, and the same principle applies to them financially.
"Buying decision" mistakes must be allowed and the consequences experienced. A
parent can provide guidance in financial decisions if it is asked for, but it is not wise
to exert excessive control over a child’s or a young adult’s spending choices
If a child is saving for
skates for example, but buys everything else and then doesn’t have money for the
skates, there are several options for the parent. They may simply give in and buy the
skates, which teaches the child that the Bank of Mom and Dad is always open and has
unlimited resources. A better solution would be to make a new agreement. This new
agreement could be something like, "OK, I agree to buy the skates for you now, but
you will be (carrying out a new chore) for the next six months." Or, the
allowance could be cut in half until the skates are paid for. The best option might be to
postpone the purchase until the child has saved the full amount to pay for them.
Put any skate purchase plan
you devise in writing, and you and your child must sign it. This way, the agreement
is clear and you can review/revise it, if necessary. This is an excellent opportunity to
teach your child the concept of borrowing and how to use credit, as with a bankcard.
Q. Is there an optimum
cutoff date for the "Bank of Mom and Dad"?
A. It depends upon the
family situation, of course. Temporary hardships may mean the bank stays open a bit
longer. Before parents make decisions regarding financial guidelines, it is necessary to
work out a plan that is beneficial and acceptable to both themselves and their child. Both
parent and child may need to compromise to reach a joint decision. Just because a child
demands an answer right now doesn’t mean the parents can’t say they need some
time to work out a plan.
Many parents have hidden
agendas and use money to keep the child dependent upon them and to lock them into the role
of a child even after they are adults. They are much easier to control when money is used
as leverage. To many parents, their money is their only identity. "If my kid looks
perfect, then people will think I am a successful parent." In that case, the parent
is actually fulfilling their own need to "look good" to others.
Q. What if parents do
not agree upon when the Bank of Mom and Dad should be closed?
A. Parents need to be
conscious of their own money goals and also to have a family spending plan. It should be
visible for all members of the family to see. Hold family meetings to discuss finances at
regular intervals. On some level, a child as young as 6 years of age can participate in
family money planning meetings. Parents who are irresponsible with money will most likely
raise children who follow their lead.
Q. In today’s
environment how do you teach a child that their personal value is not directly connected
to the things that money can buy?
A. You can start by
teaching them the responsible way to get what they want. Don’t try to teach them by
withholding or overindulging. Keep your financial agreements. Do not promise what you
cannot deliver. Plan way ahead for large purchases such as buying a car for a newly
licensed driver. Be sure to include the cost of maintenance, fuel and insurance in your
planning
Divorced parents should
attempt to be in accord when teaching their children about borrowing and spending money.
That may be a monumental task if money problems led to the divorce in the first place.
Lastly, get your own
financial house in order. Your children learn most by modeling after your
money-managing skills rather than by some abstract concept you may attempt to teach them.
Marilyn August holds a Masters degree in Education from Northern Illinois University and
is founder of Wealth & Wisdom Seminars. The author of "Soundbites for Healthy
Wealthy Living”, she publishes a monthly
"Thinking Money" column in Living Better Magazine of San Diego. The author can
be reached by E-mail at wealthyu@cox.net
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