If you're mired in credit card debt and have no savings, you may occasionally look back and wonder where everything went wrong.
That's why, if you're a parent, you can do your kids a solid if you figure out whether you're raising a future saver or a future shopaholic--and try to subvert the latter by teaching them the ins and outs of how money works. It's worth a try.
Of course, it's impossible to know the future and it's unfair to your kids, who may well surprise you, to take any of the following red flags too seriously. Still, if you do wonder and worry about how they'll manage money in the future, here are some possible signs that, yes, you're raising a financial disaster.
Red flag: Your child is easily swayed by television commercials and friends' opinions. If he or she sees something cool, he or she wants it.
This could mean: Your kid will be an impulse shopper.
Possible solution: That may not be so bad, of course, but it all depends how often your kid impulse-shops.
If your child gets an allowance, and you're out shopping, consider letting your kid buy the first thing he or she wants immediately with his or her money, even if you know it's stupid, and, really, especially if you know it's a stupid purchase. Then continue shopping, and when he or she wants something else but doesn't have the money to buy it, this can be that teachable moment. It's an especially useful exercise in, say, a toy store, where there are plenty of items your child wants.
"Five minutes later, you know you're going to go down another aisle, and your kid is going to wish they had bought something different," says Amy Rosen, president and CEO of the Network for Teaching Entrepreneurship, based in New York City, which teaches entrepreneurship to mostly low-income high school students. Rosen is also the vice chair of the President's Advisory Council on Financial Capability, which lasted from Jan. 29, 2010, until Jan. 29, 2013, and was tasked with, among other things, finding new ways to improve Americans' bottom lines through financial education.
"It's really all about guiding kids when they're making shopping choices," adds Rosen of the toy-store teaching moment. "It's kind of a no-brainer."
And, of course, if you feel sorry for the little guy or gal and you really hate the thought of that allowance money being wasted, you can always then teach your child how some stores have return policies.
Red flag: Your child is always forgetting to do homework or give you important school papers.
This could mean: Your kid is going to constantly pay bills late.
Possible solution: Yes, you might want to get your child a calendar, or a better one, to help him or her keep track of important school dates and hope that leads to better grades, a good college, a decent job and salary, and someday, better money-management skills. That said, when it comes to teaching your child about money, the most important thing is to simply talk to your child about it.
Parents aren't doing that enough, according to the fifth-annual Parents, Kids & Money Survey, recently released by T. Rowe Price. On the plus side, 73 percent of the 1,014 parents sampled reported that they have regular discussions with their kids about short-term financial topics like back-to-school shopping, but only 39 percent said they talk about long-term financial planning.
Last year, the American Institute of Certified Public Accountants released a survey showing that children are, on average, 10 years old when their mom or dad has a first financial conversation with them about money. That may be too old.
"Teach children [about money] while they are in elementary school. Don't wait until they go to middle or high school. By then, bad habits are formed, and it may be too difficult to unravel them," urges Prakash Dheeriya, a professor of finance at California State University--Dominguez Hills and the author of a book series called "Finance for Kidz."
Red flag: Your kid seems to make a lot of rash, even stupid, decisions.
This could mean: You can envision your future adult son or daughter buying a very expensive car that they can get a loan for but can't really afford--and then hitting you up for money.
Possible solution: Michael Goodman, a financial planner in New York City who serves on the American Institute of Certified Public Accountants' National Financial Literacy Commission, used to do something pretty ingenious when his own two young kids were younger.
"We kept track of all the money they get throughout the year, including birthday and holiday money," Goodman says. "We'd also keep track of how they spent that money. And then at the end of the year, we'd add it all up, and we were always surprised at how much money they had, and we'd look at what they bought, and we'd discuss whether it was a good purchase or not. Like, did I enjoy that computer game?"
Not only was it educational for his kids, says Goodman, it has been educational for him. He has a pretty good sense of his children's money personalities and their financial strengths and weaknesses.
The theme: Just talk to your kids. Yes, there's a pattern emerging in all three of these scenarios. Any reputable personal-finance expert will tell you that the best way to keep your children from someday making colossal financial errors as an adult is to openly discuss money issues with them.
But don't go overboard, says Rosen, who points out that if you force your children to save all of their money and never have any fun buying anything, you could end up giving them the financial adult-monster DNA you're trying so hard to avoid. In other words, if you don't allow them to have a little fun with their money, once your children have the freedom to buy whatever they want, whenever they want, they just may.
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