It seems to be a crazy question, but would you let your child do things that might hurt themselves or negatively affect their life? Most of us would never let out child play in the middle of the road. We would never let them play with or stick things into an electrical outlet. We would always stop them from jumping off a steep cliff. All of these sound absurd when a parent stops to think about it. However, when it comes to personal finances, many will allow their children to do some irresponsible things when it comes to personal money management. The truth is your child needs you to make adult financial decisions.
I have stopped short of saying, “I have seen it all now…” when a new situation presents itself. It used to be, when I would say that, right around the corner would be something new I learned from someone who did something totally crazy with money thinking they would get ahead. Rarely do parents stop and think that they should be protect their child, likely a teen or young adult, from stupid (I tried not to use that word, but could not help myself) financial mistakes – some that may haunt them the rest of their adult lives.
Regularly, I see these things. Here are some of my favorites:
- A parent or grand-parent co-signing for a loan. There are issues with the credit risk of this child and ALL THE TIME parents and grand-parents tell me that their child is going to be different. So the people at the bank, those who are experts in how to best manage risk, tell you the child is a credit risk and you say – no, not my child, I’ll co-sign for them. Crazy!
- Parents and grand-parents who have worked hard, who have managed well and now see their child struggling financially. How best to help them? Loan them some more money or, in some cases, even assume the payments for them.
- Through the years I have met several parents who were intent on getting out of debt. To the point that things they should have been doing in their pursuit were not done. As a result, college expenses come up. Several parents have shared with me that when their child was not able to find a way to go to college, they ENCOURAGED them to get student loans. Really? Do as I say, not as I have done? Its is even more crazy when the child decides they are going to a private school. Student loans on steroids!
- Parents will tell me that they have encouraged and helped their child establish credit, usually a credit card, so that they can build credit for their future. Most of these parents are talking to me because of the debt situation they find themselves in.
Sometimes it is not even encouraging the child to jump off the financial deep end, but it is a parent’s actions that set the stage and teach the child it is ok to do irresponsible financial things.
For instance, parents who will tell me that they “bought”, really financed, the new car because they were making a “good investment.” Some have shared with me that they allow their child to pay using the credit card so they can feel what it is like to go into debt. Really?
Parents and grand-parents, your child, regardless of age, is expecting you to make adult decisions. Just as you practically cared for them when they were young, they need to see and hear you making sound financial thoughts or direction when it comes to what they need to be doing.
Many of you reading this can offer help to others as they make adult decisions for their children and their financial growth. Please respond below.