The Key is Establishing Smart Financial Boundaries
As parents, one of our responsibilities is to teach our children the money lessons that will help them to save, spend, and invest wisely. The lessons we teach and the example we set form a strong influence on how our children interact with money as adults, so it’s important that you talk to your children early and often about how you want them to value money. With your words and your actions, you have the opportunity to teach your children healthy money behaviors, so avoid these three common mistakes in order to help set them up for success.
Mistake #1: Paying the bills for your adult children – with no boundaries in place.
The urge to help your children out as they enter the world is a strong one. However, putting some boundaries in place – especially financial ones – can help your child learn to stand on their own feet. Think about all those moments when you’re tempted to give them money for gas, rent, or a cellphone bill – it can add up to hundreds or thousands of dollars per month. Additionally, easy access to your money prohibits your child from learning how to support themselves and budget accordingly. You’re not doing your adult child any favors by always bailing them out financially.
It’s understandable if you’re worried that your child may fail or falter as they’re just starting out – but isn’t that what growing up is all about? Teaching your child how to financially support themselves in their young twenties is much better than leaving them to figure it out in their sixties when they may no longer be able to depend on you.
Instead, teach your children how to make a budget and emphasize how important it is to stick to the budget and manage their money smartly. Knowing how to make and stick to a budget is an invaluable skill that your child will be able to use for their entire lives to keep them on firm financial footing.
Mistake #2: Allowing your child to pick any college they want with the idea you’ll foot the bill.
There is a powerful social pressure to send your child to the best-ranked college or university they get accepted to – and these are nearly always the most expensive schools, too. As a parent, you may feel immense pressure to foot the entire bill for college and feel as if you’ll disappoint your child if they can’t attend the college of their dreams. However, with tuition costs skyrocketing, giving your child free rein to pick any school they want with the expectation that you’ll foot the bill puts you both at a serious financial disadvantage. It could lead to you taking money from your retirement savings or emergency fund to help cover the costs, which is detrimental to you and a poor lesson for your kids.
Rather than put that financial strain on your family, sit your children down and talk to them about how much you saved and can reasonably provide to help support them through college. You can also get specific about which schools do and don’t fit your budget. If they’re set on a school that’s expensive, look into scholarships or a part-time job they can work to help pay tuition or housing costs. Additionally, if they seem set on taking out a loan to cover the difference, make sure you’re clear in telling them what carrying hundreds of thousands of dollars in debt will look like in their future.
Mistake #3: Footing the bill for a fairytale wedding with no budget.
In the age of Pinterest and social media, it seems that weddings are bigger and grander than ever before. It makes sense that there’s such pressure for the perfect wedding, as it’s a significant and meaningful milestone for many people. However, that dream wedding typically comes with quite a large price tag. According to The Knot’s 2019 Real Weddings Study, the average wedding now costs around $34,000. It’s important to speak with your child about whether a lavish wedding is really a smart financial decision.
More than anything, weddings are supposed to celebrate love and commitment. It should be about the relationship more than it should be about having that designer gown or those huge flower arrangements. Despite the pressure to give your child everything, they want to make the day special, be honest about where your budget lies and what you can reasonably afford. Look into doing DIY decorations to give the wedding a more personal – and more affordable – touch. The day can be special without spending tens of thousands of dollars.
The Bottom Line
Our relationship with money is learned, through our parents and our life experiences. If we want our children to grow up to be financially stable and successful, it’s important that we teach them the value of a dollar and how to properly manage their money.
A great way to do this is by demonstrating what smart money habits look like in day-to-day life. That means placing boundaries around what you’re willing to and able to spend on them as they grow up. It doesn’t make you a bad parent if you can’t afford to send them to an Ivy League school or foot the bill for a destination wedding. Rather, by respecting your own financial reality and creating an opportunity for your children to contribute financially themselves, you’re doing more to prepare them for a successful financial future than if you didn’t.