Sunday, February 03, 2013

13 Ways Parents Can be Financial Leaders


February is Parent Leadership Month.  One area parents should show more leadership to their children no matter their age is finances.  Studies have shown that even those who learn about finances in school are still not fully prepared to manage their finances as an adult.  Most children don’t learn how to manage money until they become adults and some still struggle.  Most learn on their own through trial and error.

Starting early by giving your child an allowance helps them make mistakes under your guidance and they can learn from their mistakes without the painful financial consequences of mismanaging money many adults experience such as filing for foreclosure, having bad credit or filing for bankruptcy.

Some parents don’t have good money management skills and therefore can’t pass on valuable knowledge to their child.  Children develop bad habits at an early age so it is even more important to make sure your child receives good advice on how to manage their money.
Due to the economy many adult children and moving back home.  According to NEFE:  50% of parents are providing housing, 48% are helping with living expenses, 29% of giving money and 28% are helping with medical bills.  Moving back home is the only affordable option for many adults. Some adult children are moving back home due to unemployment, debt or divorce.

It is important to clarify expectations when helping adult children financially. Some parents don’t want to see their children suffer but in some cases parents are hindering instead of helping their children.  This is especially true if children mismanage their money or make bad life decisions.

Parents have to be cautious and prevent taking on their children’s problems and making them their own.  Parents are the first teachers or leaders in a child’s life and should set good examples for their children to help prevent them from making drastic mistakes.  Here are 13 ways for parents to be financial leaders for their children. 

  1. Give guidance.  Give advice on how to manage finances and deal with problems. If you are not good with managing money sign you and your child up for free or low-cost classes in your area.
  2. Discuss. Have regular family meetings to discuss household finances, mistakes made and lessons learned.
  3. Show.  Show your children how you pay bills, manage money, shop for groceries and other items, use coupons, etc.
  4. Set rules.  Set ground rules for how your household is run and discuss them.
  5. Be supportive. Be as supportive as possible and try to see your child’s point of view.
  6. Pay yourself first.  Pay your bills first to keep a roof over your head.  If you have any additional money left over you can use a portion of that to help your children.
  7. See where you are. Determine if you can afford to help financially, if not, provide your children with other alternatives.
  8. Provide resources.  Provide resources such as books, television shows or social organizations that can offer help.
  9. Save.  Continue to save money while you are helping your children.
  10. Don’t dip.  Don’t dip into your retirement or take out a loan to help children.  Don’t co-sign for a loan or open joint credit card accounts.
  11. Debt.  Don’t go further into debt helping your children.
  12. Set a limit.  Set a limit on how much you will help and stick to it.
  13. Draw up a loan agreement.  Sign a contract if you want to ensure you will get your money back.

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