The estimates to raise a child into adulthood range from $500,000 to more than a million dollars when you review the current cost studies being done. Feeding a teenager seems like it could break the bank sometimes. Groceries, medical care, and clothing can undoubtedly be a few hundred thousand dollars over 18 years. Paying for after-school activities such as sports, dance classes, music lessons, or whatever activities your child is involved in can run thousands of dollars a year. Add in what is often tens of thousands of dollars spent on school events, a car, technology desires, concert and movie tickets, and high school trips abroad. It is easy to see how those costs can quickly add up to a million dollars or more.
Does your child have any real idea of how much of your paycheck is spent on them? I read and repeatedly hear that parents do not want to talk about money with their children. They do not want to deprive their child of choices – whether in activities, in clothing and shoes, in entertainment, in eating out, in any area of their lives.
By not educating, are you setting them up for success? Will your daughter be able to manage a bank account without overdrawing it? Will your son end up deep in debt because they do not understand the impact of caring a balance on a credit card? Will they decide on a college whose costs cannot be supported by the potential salary? Will they come out of school overloaded with student loan debt they have difficulty paying off? If every time your child asks you for money and you hand it to them without any strings attached, how will they learn the value of a dollar? If you habitually give your child your credit card without spending limitations, will they understand how many hours you have to work for what they might charge in an afternoon at the mall or online? How will your child learn that “money does not grow on trees” if for all appearances it does for them? They ask, they get.
Whether your child is on the honor roll or struggling to pass their classes, the ability to manage finances will have a significant impact on their life. It is too late to start learning those lessons once they are through their formal schooling or sending them off to college. Money lessons should start early. There are lessons that even a 2 or 3-year-old can learn. The earlier habits start, the easier they are to become part of you. Granted, the lessons being shown should become more complex as the child gets older.
Many behavioral specialists will tell you, and we certainly all have experienced the fact that children will do what you do and not always do what you say. Part of raising financially responsible children and setting your child up for financial success is behaving in a financially responsible manner yourself.
Let your child watch you making financial decisions. Explain to them while you are making choices. Some examples:
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- As you are trying to decide where to go on vacation, talk about the budget for this vacation. Depending on your son or daughter’s age, maybe you even let them have input on the decision.
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- When you go grocery shopping, have your child compare the prices between the name brand and generic version or have them determine which size has the best unit price. Maybe even explain why you shop at this grocery store rather than another chain.
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- Sit and pay bills with your child so they can see what it costs to run a household. Talk about the impact of leaving lights on or taking long showers.
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- If you drop all your change in a change jar, why are you saving those coins? If it is meant for something for the whole family, ask your child to contribute their change too. Let them help you roll the change or take it to the bank to see how it adds up.
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- If your child wants to get involved in several activities, each with a price tag attached, you may want to sit with them. Go through the costs and have them choose rather than just allowing them to be involved in all initially. Maybe, later allow them to add another activity while re-evaluating the costs.
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- Require your child to plan and purchase the items for one dinner a week. You can even have them cook it, teaching them both financial skills and life skills.
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- Have your son or daughter help you pay bills through the online bill pay if that is how you pay them. Allow them to write out a check so they know how to do it. Let them see how you use your ATM card, debit card, and credit card.
There are so many lessons that you can incorporate into your daily activities. Think about what you really want to make sure that your child knows and understands. Figure out a fun way to get your point across. Give them opportunities to practice. It is likely that if a mistake is made, it will have far less impact on their financial future if it is made today and a lesson is learned than if it happens later when they are out of the house.
The upcoming generation is the first generation where there is a concern that our children will not be financially better off than their parents. Many factors are contributing to this. Education costs are increasing faster than the inflation rate, while the amount of financial aid to pay those costs is decreasing. Many new graduates have difficulty finding jobs in their fields with the expected salaries for their education levels. Fewer employers are offering pensions, which means individuals have to save greater amounts for their retirements; this is compounded by life expectancy also increasing. Health care costs are rising, and a more significant amount of expenses are being paid out-of-pocket rather than by insurance companies as we turn to alternative forms of treatment.
Take the time and make an effort to make sure that your child has the skills to beat the odds. Look for the post on Thursday, September 3rd, for information on how we raised our son Mike to be financially responsible. Maybe it will give you some help in moving forward with your child. Several websites are available to help with financial literacy for both you and your child. Spend some time every week improving your financial knowledge!! It can make all the difference in your life and the life of your children!!