Money Talk: Do It with Your Teen This Summer
This is the time of year when I advise parents to talk with their teenage children about money and the basic financial skills that they will use for the rest of their life. But it's a conversation worth having anytime they are interested to hear it.
Parents who are financially well to do can provide for all their child's needs and wants. Even if you are able to do so, experts advise against it. Instead, you should teach your children to respect wealth, how to manage it, the responsibility that comes with it. Also teach discretion, and to act with respect always to those who are not financially well off.
When well moneyed parents give their child a new car, lots of cash and a credit card, although well intentioned, this does nothing to teach a young person how to manage money. This only teaches them to spend money, often to impress their friends or to gain popularity. This can also be a root cause of bigger problems later in life.
Parents with average or modest financial ability can make different mistakes. Many of these folks deplete their savings, borrow from retirement plans, tap out their homes equity, or never save for their own retirement in order to pay for their child's needs, wants and college costs. This can create financial problems that will impact the parent and the child down the road.
While it's noble to sacrifice so that your child has an opportunity for self improvement, you also need to keep in mind that there is a reason why the airlines tell adult passengers to put on their oxygen mask before assisting the children. A parent's ability to help their children is impaired when their own financial well-being is at risk.
It's important to remember that while it sounds nice for your children to have no college loans, it's important to keep in mind that they have a lifetime of earnings ahead of them. There is a reason why there are grants, scholarships, and financial aid for college but there are no such programs to help you pay for your retirement. .
Whatever a parents view on providing financial support for their children, there is a recurring theme. Parents who teach their children the value of money and how to manage their spending before they go off to school, raise young adults who are less likely to get into financial difficulty later in life.
Check back in later this week when I'll give advice on some of the financial matters to talk about with your teen this summer.
Ray Martin
View all articles by Ray Martin on CBS MoneyWatch»
Ray Martin has been a practicing financial advisor since 1986, providing financial guidance and advice to individuals. He has appeared regularly as a contributor on the CBS Early Show, CBS NewsPath, as a columnist on CBS Moneywatch.com and on NBC-TV's morning newscast TODAY. He has also appeared on the Oprah Winfrey Show and is the author of two books.
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