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.

Smart Phones on a Tight Budget: Good or Bad Idea

I have iPhone fever. For months now, I have agonized over whether to upgrade my flip phone when my contract ends (which ended this past October), or use my current phone until it dies, then try to revive it and use it again. I have talked about my small budget in previous posts, and that, accompanied with my student loan debt, truly has no room for luxuries like a smart phone which would add $30 a month to my bill. But what if I cut out other stuff like eating out, coffee, or my gym membership I rarely use? Could I afford it then? And even after I cut all that out, should I really use the extra money on a data plan each month when I have student loans to pay? After lots of asking around and research, this is what I have come up with:

I have too much debt.

I never wanted to be someone who complained about money and bills and then spent money on stuff I didn’t need and couldn’t afford. I see people who aren’t able to put food or gas in their car with their $90 a month cell phone plan (and I know how much it costs-I have been doing research for months), and I don’t get it. I hear of people who have their loans in forbearance because they cannot afford the monthly bill but have a smart phone. People think that when their cell phone contract expires, they have to run out and get a new phone. With all the advances in smart phones, people want them more and basic phones less so companies aren’t making basic phones as much. It is almost companies are forcing us to buy smart phones. Your phone can and will last more than the year and a half it takes for your phone upgrade. It will! I want to be able to afford gas in my car when I need it and to pay my student loan and car insurance when it’s due. Thirty extra dollars a month adds up. That is $360 a year that I could apply to my student loan!

I am willing to cut some stuff out of my budget, but not enough.

I would be crazy to cancel my gym membership to afford a smart phone. I need to go to the gym because that is all the exercise I get, and I most certainly don’t need a smart phone. Once I figured out that was not going to work, I started actually going to the gym to make use of the membership I was paying for every month. Health>portable internet. Always. As for the other stuff in my budget, anything I cut down or out should be used to go towards my debt, not a data plan.

Where I am at in my life cannot make room for a smart phone.

I live at home and thankfully do not pay rent. Most people my age have moved out and have many more bills to pay than I do. Until I can get to the point where my debt is clear and I am out of the house, there is no way I should think about an iPhone! Financial independence is much more important to me than being able to do FaceTime with friends.

I don’t want to give up the cell phone company I am with for something cheaper (sounds high maintenance but I worry about being stranded with no service).

I looked into not renewing my contract with Verizon (where I would be paying $90 with a data plan versus the $60 without) and paying less per month with another cell phone company. I found pre-paid and not pre-paid options out there with good phones that I would have to pay top dollar for (around $500-700) with a cheap monthly service ($30-50). Doing some math, if I had the prepaid service for 2 years and paid the above amount plus the amount of the phone, I am still paying less than getting a free phone from Verizon and paying $90 a month. Good deal, right? Maybe. However, as much as I drop stuff, I couldn’t justify forking out all that money for a phone whether I had a fancy Otterbox or not, nor did I want to part with Verizon’s top notch service. Sounds biased because it is, I guess, but it is how I feel.

I have the rest of my life to buy cool stuff.

I don’t need everything I have ever wanted right now. I am 22 years old. I have plenty of time to buy an iPhone, live in my dream house (for a while I thought about what it would be like to live in my dream house at 22 when I actually found my dream house for sale), settle down and have kids, or get the job with the big money. All good things will come with time.

So, I’ve decided…

To wait until I have paid off my student loans to get an iPhone. There might be an iPhone 12 at that point, but I will get it and love it and it will be great. I have done some serious consideration and been so bold as to post my decision for the world to see because we all know what happens when you tell everyone a big decision. You have to stick with it or you deal with a lot of outside scrutiny. When my education is paid for, I will celebrate with a smart phone. Until then, I will keep the era of flip phones alive.

Generation Y Not: Day 3

Continued from December 14 and 17 post on why Generation Y isn't as bad as society claims.

We spent our lives being told we can do anything, so why not let us prove it?

I grew up in an era in which all people, no matter what their abilities may be, were celebrated. “Everyone is a winner” is what I hear most people refer to it as, usually while scoffing. The reality is that people don’t like their feelings hurt; people want and value constructive criticism. We want to get better at how we live and work, which is why we need the feedback that so many employers roll their eyes at. We want to live out our dreams but we often need guidance in how to get there. We aren’t asking for a pat on the back for going to the bathroom or for getting to work on time. We are asking for a chance to shine, and when we do, to notice it. Generation Y has a reputation for needing approval, and I can’t understand how that is a bad thing. When we get approval, we know we have done something right, and don’t you as employers want us to do what is right? If we fail, so what? We learned something. Life is about lessons. Just let us do our thing, and if we can’t do it, replace us with someone who can.