Tuesday, January 15, 2013

What should parents pay for?

When I was little, I rarely bought anything at all. I’d collect my money in a little tin box and only take it out when I was desperate. And rarely was I desperate. I’d want this or that so I would try to convince my mom to buy it so I wouldn’t have to spend the precious cash I had been saving for so long. When she said no and that I could buy it with my own money, I was usually immediately cured of wanting it. After all, who wants to spend their own money?

As I get older and learn to depend less on my parents and have more responsibilities, I am fascinated by what parents are willing to pay for and for how long. When I graduated college, I was scared to death to have my car’s title in my name and to be responsible for paying taxes on it. And while my parents still pay for stuff like food and shelter since I live at home, I know it is just a matter of time before I am out on my own and bills like that become my own.

Although there have been some major changes since I graduated college, transitioning from paying for 60% of life’s expenses to 75% hasn’t been much of a change for me. But this isn’t the case for all high school and college graduates. Many of them are still being taken care of by their parents and often have a skewed concept of money and budgeting. While this is a subject that I feel passionately about, I won’t lie by saying I have always been the most financially savvy person. After being so tight with money all my life, during my sophomore year of college, I spent half my savings on clothes and entertainment. After learning a big lesson, I have spent a lot of time and energy trying to get it back. I’ve made my share of financial mistakes but have come far since. My parents have helped me tremendously and there is no way I’d be where I am at today if it weren’t for their mercy and understanding. But, I’ve learned to make it mostly on my own and I worry that our generation is falling behind on their own financial independence.

Take Anna, for example. Anna has never paid for her cell phone bill, insurance, trips overseas, or college education. But she does pay for any extra expense like clothing, gifts, and gas. Mackenzie bought her first car in cash and pays for rent, her cell phone bill, college, and food, but her parents pay for gas and her car insurance. Samantha pays for car insurance, cell phone bill, gas, and student loans but doesn‘t pay for rent. Jeff paid for his car, pays for his car and health insurance, cell phone bill, any car repairs (and there are many), any new purchase such as a laptop, iPod, etc., shampoo, clothes, car insurance, gas, and the electric bill. Is this fair? When should parents cut their children off?

When I hear of parents who pay for their kid’s expenses at an older age, I usually hear it is because they are doing so well and working so hard. I get that. Perhaps they have gotten into a great school that requires a lot of work and there is no room for a part time job. Or maybe they can’t find work but are determined to be independent and their parents are willing to help them out. Maybe their parents have the resources and wouldn’t have it any other way. Whatever the reason may be, it is interesting to see how choices and opportunity hinder and enable kids to be financially independent.

Years before college loans were such an issue, people could graduate college and most of the time move into a house upon graduation. Work was available, and in general, people spent less and saved more. But 2013 is different. Student loans are through the roof, and there are so many ways to spend money,so few people are able to put a down payment on a house when it is time to move out. So back to the initial question. What should parents pay for during and after high school? Through experience, this is my (non) expert opinion:

Every situation is different, so it depends.

Anna did great in school (high school and college) and is dedicating her life to helping people by being a social worker and English/Spanish translator. She’s worked hard to get where she is at and doesn’t waste any talent or resource she’s been given. No matter what her parents do or don’t pay for, she will be grateful.

Mackenzie is the thriftiest person I know. She isn’t going to pay a lot of money for something or buy unnecessary things. She has the best budget and is extremely giving. She was the Valedictorian of her college and she deserves any help she gets.

Samantha is saving for a house and taking the financial burden of student loans from her parents. She contributes with housework and cooking.

Jeff is helping his parents with bills and is responsible for his assets.

This works for them. While it may not be perfect or what I or my family might do or you and yours, it works for their families. These people and those like them are learning to save and budget in their own way. In my previous posts, I talked about how millennials are given an expectation to be at the same point post high school and college that those before them were at their age. But times are different and therefore, expectations must change with it. What I worry about the most are kids who pay for little and have no concept of money. The people mentioned above had a good sense of financial responsibility and are trying to better themselves. But what about those kids that live at home until they are 25 and older? What should they pay for?

I won’t pretend to know the answer to this question, but I will share what I would do. I went to an IDA class that said any child over 18 that is living with their parents should pay rent. My parents started this with my sister when she had a hard time saving in her younger years, but they did something different. They led her believe that they were using the money for this or that (we would go to dinner where my parents would pay and she would make comments on them actually paying with her rent money), but they were actually saving it for her. When she got ready to go back to college, they gave her the rent money back to use on her tuition. What a great surprise! My suggestion is to help your child in any way possible. If you can, have them give you money each week or month so they can use that money for a big purchase later on (such as a down payment for a house or a car). Financially educate yourself and teach your children the same values so that when they finally do leave the nest, they will be financially smart and independent.

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