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?