I said that he could have waited until he got home and I would have paid for it. He said;
Really? I thought, since I’m nineteen years old now, I should be paying for my own hair cuts
First of all, I was taken aback at his maturity. It made sense. He is an adult and should be starting to be responsible for these kinds of things. I know he has money (more discretionary money than I do, that’s for sure) so, yeah, maybe he should be paying for his own haircuts.
Second of all, it made me think. When DO you stop paying for your kids haircuts? Or their clothes? Or their rent?
I moved out when I was 19 years old; paid my own way through college (with the help of student loans); paid all of my student loans off myself and didn’t buy a car or a house until I could afford one. And I lived in an apartment.
Remember apartments? Do kids live in apartments anymore?
There was only one time that I had to go to my brother to cover my April rent. My school loan money had run out and I hadn’t gotten my first paycheque yet from my summer job.
That was it. My parents haven’t helped me financially since I became a legal adult and I love them for it. It forced me to be independant.
I’m not against helping the kids and I’m not judging anyone else’s choices on the matter. I just think that sometimes “helping” is not always in the best interest of your adult child. When the kids become adults, they need to learn how to manage money and what things cost.
They are going to make mistakes – we all did – but they will learn from their mistakes.
Often, a kid could be self-supporting but isn’t because he/she doesn’t need to be. You’re there to bail them out whenever they get into trouble. They don’t learn if you don’t let them learn.
I have highlighted a few things that you should think about when considering helping your adult children financially. Not just for your benefit, for the benefit of your kids too.
Living at home to pay off school debt
Student debt these days is much more than what we had so living at home for the first few years after graduation is not a bad idea – as long as the money saved is actually going to pay off the debt.
This is a tough one because how do you know? Do you ask for evidence of a payment every month? If they are living for free in your house, I don’t think that that is an unreasonable request.
If they respond with the traditional “oh, so you don’t trust me?”, then remind them that they are not 15 years old anymore and you are not asking to smell their breath.
Another approach is to set a time limit. Look at the debt, divide it by a reasonable payment and you will come up with a number of months it should take to clear the debt. Be clear that this is how long they can continue to live at home rent free. And stick to it.
Living at home to save for a house
With the high cost of rent today, I understand that it’s difficult for the kids to save enough money for a down payment on a house (insert snort about the high cost of houses today). So, again, letting them live at home to save is not a bad idea. But, again, only if the money saved is actually being saved.
A great idea is to have the kids actually pay rent equal to what a mortgage payment would be and put this money into a high interest savings account for them. This helps them save while also teaching them the responsibility of monthly bills.
Be aware, though, that you need to be a landlord on the first of every month, not a parent. Their mortgage company isn’t going to care that they’re short of cash because that trip to Cuba was such a great deal.
They need to know that the “rent” is not optional and needs to be paid and that non-payment results in the same consequences at home as it does in the real world. And you need to be able to follow through.
Think long and hard about whether or not you would be able to evict your own kid.
What is the real cost of the financial help you’re giving?
The cost of helping you’re kids doesn’t always stop when the cheque is written.
Are you putting off your retirement by working longer, going back to work or pulling from your retirement savings? These are costs that you will pay later so you need to sit down and really think about how much and how long you can afford to help.
A loan may be the better option. The kids are young and have time to pay back a loan. You don’t have time to recuperate your retirement savings or the lost compound interest.
Note here that THEY should get the loan – not you. This leads me into my next point.
Don’t co-sign for anything unless you are willing and able to pay for the whole thing
In my opinion, you should never co-sign a loan. NEVER. Not for your kids, not for your parents and not for a sibling or a friend. If someone cannot qualify for a loan, it is generally for a good reason. It may sound harsh but WHY would you take on a loan for someone who has been rated a risk by the people who love to lend money to just about anyone.
In my opinion, co-signing is the second stupidest financial invention. Pay day loans come in first.
Do you have to be fair?
How many kids do you have? Maybe one of them has been responsible and smart about their finances or has a better job and has done very well. Is it fair that they are financially penalized because of this?
Like most parents, I always made sure I spent the same amount on both my kids at Christmas. Should financial help be treated the same way?
Of course, a common argument is;
I am not giving this money to Johnny, it’s a loan.
If this is your argument, then stand by it. Keep track of the “loans” and if they aren’t paid back by the time “inheritance” time comes around, the outstanding amount should be paid back then. ie. deducted from the inheritance.
I don’t mean to sound like a cold, hard biatch but I think that’s the fair thing to do and know people who have done it (or plan to).
Don’t just write a cheque
You need to be clear about what you’re helping with. A study by Merrill Lynch found that more than a third of parents don’t know what expenses they are covering. I don’t think the kids mean to squander but cash just finds a way to disappear on the way to the bank.
If it’s rent, write the cheque directly to the landlord. If it’s an emergency car repair – offer to pick up the car and pay. Take them grocery shopping or give them grocery store gift cards. Gas cards are a great idea (I even give those as Christmas gifts)!
Find other ways to support
Cash isn’t the only way to support your kids. Babysitting so they can look for work or put in extra hours at the job they have is a great one. It’s a win-win because you get more time with the grandkids.
Offer to have a cooking night. This is where you buy all of the ingredients and then together, you cook up a bunch of freezer meals saving them money on food.
I’ve already mentioned grocery and gas gift cards. Be creative. Think outside the box.
Have them earn your financial help
Similar to earning their allowance when they were young, think of ways that they could earn the financial help they need now. Seasonal yardwork and small household repairs come to mind immediately.
How about cleaning out the garage or the attic or their old room? Have them clean out all of their own stuff; heck, they might even find something worth selling on eBay for extra money.
I am not alone in thinking that high school should be teaching personal finance. In fact, it should be mandatory. But, alas, that rant is for another day.
Being responsible with money is not easy and doesn’t come naturally to most people, it needs to be taught. Teach the basics of finance and budgeting to your kids.
However, if you suck at money management yourself, don’t teach them your bad habits. Think about paying for professional advice and attend the session together.
These are just some ideas to get you thinking
I recognize that we all have our reasons and motivations when raising and teaching our children but I am on the side that believes we are coddling our kids too much these days. This is resulting in a delay of their “growing up”. The kids are now reaching their thirties before having to face the real world – and financial reality.
In my opinion, that is too late.
But I’m not judging anyone here. In fact, I would love to hear your thoughts – leave a comment below and, hopefully, we can open a discussion.
Image courtesy of Stuart Miles at FreeDigitalPhotos.net