We all want the best for our kids.
All too often, though, parents fail to provide one of the most important tools for real world success—financial literacy.
Worse yet, many parents are bad models, which sets their kids up for failure upon leaving the nest.
“I think as parents we are all still learning about money management ourselves, sometimes alongside our kids,” says David Reagan, senior vice president of private client services with City National Bank in Irvine, Calif. “Communication about finances in the household is sometimes more of a one-time lecture in high school rather than a process that teaches them how to save, spend and make charitable gifts as they grow.”
Here are eight common money mistakes parents make.
1. Too Quick To Help
It’s hard to watch your children struggle, especially when you have the means to make their worries disappear.
But jumping in with an offer of assistance, sometimes before you are even asked, can do more harm than good.
Whether it’s a teenager who overspent on a snowboard and now can’t go to the concert of the year, or an adult child who can’t get a loan, it’s best to let them figure it out on their own.
That teen may surprise you with a part-time job, and the older child will learn a valuable lesson about the importance of keeping one's credit clean.
“Many parents want to help their children with the down payment on their first home, but this can often create a standard of living that the child cannot afford on their own,” says Evelyn Zohlen, a certified financial planner in Huntington Beach, Calif. “Homeownership entails much more than just paying the principal and interest on a loan. The cost of insurance and taxes, maintenance and ‘keeping up with the Joneses’ in their neighborhood can quickly overwhelm the child and set them up for financial ruin.”