July 16, 2004/Tamuz 27 5764, Vol. 56, No. 43
Educating children makes for money-smart adultsLEE EISINBERGEveryone has heard the reference to raising "money-smart" children. You certainly may have and you may have done your best not to be tempted to give your children all the things you didn't have growing up. You taught your children about financial responsibility through investments, budgets and credit. You showed them how to plan for short-term goals, like purchasing a car or going on a vacation, and long-term goals, like saving for retirement or paying off college loans.But what do you do when those kids become adults and the lessons of early childhood just don't seem to have taken as you had hoped? In other words, how do you try to form money-smart adult children? After college, chances are your children are going to be making real money for the first time in their lives - or at least entry-level money. As graduates balance the reality of low wage entry level jobs against not only living expenses, but also in some cases thousands of dollars in student loans, most recent graduates can barely make ends meet, let alone contribute to a 401(k). As a parent, your first instinct may be to give them a leg up and help them out financially. After all, you remember how hard it was just starting out. Keep in mind, continued financial help as your kids become adults can set a bad pattern for the future. Rather than give your child a handout, think about creating incentives that will help them to save money. Encourage them to contribute to a 401(k), and tell them that you will match any deposit that exceeds $1,000. If they are paying off student loans, offer to pay all or part of the loan, and charge them a lower interest rate than they would pay through the lender. Even when your child starts to get his or her own financial legs, continue to help foster their financial independence. If it's a business venture your child wants to pursue, encourage them by offering a low interest loan rather than seed money free and clear, or become a legitimate investor in the business. If it's funds for a down payment on a first home, create a contract whereby you can teach financial responsibility while helping your child avoid high interest rates and the hassle of a regular loan. There will always be times when you want to help your kids out financially, but its better to cut the purse strings early rather than have a 50-year-old child living in your basement. Show them the value of financial responsibility and illustrate the difference a few extra years of saving or investing can make. Your kids will be more likely to react to concrete numbers and a realistic plan, and that will also help them achieve their financial goals. Lee Eisinberg is a local financial consultant. Reach him at 602-508-7863 or e-mail Lee.Eisinberg@rbcdain.com. |
