Are you doing a good job teaching your kids about money? Are you worried about them growing up unable to make smart financial decisions? Are you petrified at the notion that they’ll have to face the tough challenges you did…or worse? Do you fear they’ll repeat your jug head mistakes?
If so, join the club. Many people I know have these worries…or at least…they should.
It’s tragic. It really is.
A family works hard to get out of debt and overcome obstacles. They work their fingers to the bone to save up a nice nest egg. Then, the kids get out the shovels and dig the family right back into the hole they scratched and scraped their way out of.
This subject is especially important to me. As you may know, I was homeless and broke when I was 17. I worked my Pilgrim arse to the bone just to make sure my kids wouldn’t go through what I did. Do you think I’m going to stand by and watch my kids do something spectacularly stupid when it comes to money? No, I’m not. At least not if I can help it.
So what are a few “genius” strokes you can take to make sure your kids don’t put themselves (and you) in the poor house?
1. Don’t borrow money if you can avoid it – and especially not to pay for college.
This is not just about the debt…it’s about the debt mindset.
Lets consider the special case of higher education. When your kids see you borrowing for college when a lower cost alternative is available, what message do you send? The wrong one. You’re telling them that borrowing is OK, but it’s not. Don’t be surprised when they buy cars and houses they can’t afford either. They’re just doing what they learned…from you.
How are those tender little minds going to know the difference between good borrowing and bad borrowing? Debt is nothing to take lightly, and you must demonstrate that by doing whatever possible in order to get those youngsters through college without borrowing money.
Let them go to junior college. Work. Whatever.
This concept of not borrowing for college goes for you and for them. You’re not allowed to borrow for their higher education if a lower cost alternative exists, and you’re not allowed to let them saddle themselves with debt either.
Of course you’ll have to speak with the kids in order to make it a teachable moment. But I do have some good news. You’re the parent, they are the kids and a family ain’t a democracy. You are the “Grand Poobah”. You decide. They follow.
Even if the kids could get a “better education” by attending a more expensive school (that you can’t afford), don’t do it if it means you have to borrow money. They’ll benefit more by seeing, firsthand, how powerful staying out of debt is. That’s a life lesson they’ll never get in school. Only you can give them that gift.
Now for the second genius idea:
2. Admit your mistakes immediately.
If you ran up credit debt, explain to the kids what happened, why it’s a mistake and then tell them how you’re going to resolve the issue -including a discussion about alternatives for high-cost debt. This is a great lesson in personal finance…and much more.
Thankfully, I didn’t have the credit card debt problem, but ever since my kids were babies, I’ve tried to admit when I was wrong. I jumped at the chance. I couldn’t wait. It was wonderful, and I’ll tell you why. I figured, even though they were my kids, there was still an off-chance they’d make a mistake or two down the line. I wanted them to see how easy it is to own up to mistakes and rectify them quickly. There is nothing more expensive than ignoring a problem or working hard to deny one. I wanted kids who understood that admitting a mistake wasn’t the end of the world.
Folks who have an urgent, life-or-death need to be right end up broke. They hold on to the wrong jobs, businesses, investments and boyfriends way too long. I didn’t want that happening to my daughters – especially the boyfriends part.
Do you think these ideas have merit? Is it beyond your power to ensure your kids don’t become financial dunces? What other genius moves have I overlooked?
Adam Kamerer says
My parents taught me a lot of good lessons about money, but one of the things they told me turned out to be a bad one — they told me everyone goes into debt for college, that it’s just a thing you do. It’s a bit odd, now that I think about it, because my parents were always so adamant about pushing us to make our own decisions instead of just running with the pack, but I think at the time they just didn’t know any better — it wasn’t until I was midway through college that they started really trying to tackle their debt and understanding the truth of it.
Neal Frankle, CFP ® says
Adam, it’s cool that you have great parents. They seem to really care about doing the best they could to prepare you. I agree that this particular lesson wasn’t one I would endorse (but I don’t know all the circumstances). Yet, the other lessons must have been fantastic because you DID catch it. It’s also wonderful they set a great example of admitting errors and taking massive action to correct the problem. Thanks for sharing this story. A good one for us all.
Barbara Baker says
Part of the first lesson a parent needs to give their children is the example of the word “NO”. Too many times I see parents in my seminars (I teach high school/university student money management) that even though they can’t afford the item their children want, they can’t seem to figure out how to say no. It just makes the “entitlement” culture the kids have today even worse. Parents need to be comfortably able to say no, we can’t afford that it’s not in the budget.
Mike - Saving Money Today says
“I wanted kids who understood how admitting a mistake wasn’t the end of the world.”
Wise words indeed. I try to teach my kids that’s it’s ok to admit you screwed something up. What’s important is that you learn something so you can improve in the future.
Plus I think it’s important for them to understand that parents make mistakes too. I tell my kids all the time, “Daddy’s not perfect. I do the best I can, but I’m learning as I go.”
Luckily, I never stumbled too badly with my money, but I’m disappointed my parents didn’t sit me down about money around 13-14.
A 15 minute conversation about money basics with an 8th grader will do so much for them. It’s one of the best things a parent can give their child.
Glad to see you’re doing this with your kids, Neal. Great post!
Austin @ Foreigner’s Finances