Kids' Money Mistakes: When to Speak Up
Teaching kids about money requires a careful balance between instruction and empowerment. To effectively empower your child, it’s important to create space for your child to think--and spend--for themselves, even if it results in some scraping of their financial knees. So how do you decide when to guide and when to let it go? We have some ideas.
A Time to Speak Up
As a parent, it’s your responsibility to teach your child the rules of life. As their primary role model for finances, speaking up when your son or daughter is contemplating a financially precarious move is both your right and responsibility. But not all moments require your intervention. So what does qualify? A few categories should illicit a response: first, long-term consequences. Making a large purchase with a loan or opening a credit card can have ripple effects for years to come.
The most effective way to communicate in such a situation is to remind them of their own long-term goals. What do they want to do in the future? Perhaps they’re hoping to qualify for a car loan when they turn 18, or attend a pricey university. If today’s decisions will hinder them from seeing their dreams realized, the most loving thing to do is to speak up.
Another time to raise your voice? When the resources they’re squandering belong to you. If they used their "emergencies-only credit card" to go to the movies after blowing their allowance, you’ve earned the right to be heard, as well as the right to establish a consequence.
A Time to Stay Silent
Sometimes it pays off to keep quiet. Most of us learn more from mistakes than successes. But this is a category is riddled with “ifs.” If your child has earned money of their own through an after school job, if their spending is within their means, and if they’ll be able to recover from the consequences of their spending, it may be wise to let them learn from their whims.
There’s a reason that trust fund heirs, lottery winners, and ex-prisoners share an uncanny difficulty adjusting to life of financial freedom. Having lived a life of total control (or no rules at all), it can be difficult to strike the balance between careful spending and careless splurging. It’s true that practice makes perfect. Even when practice leaves you with scraped knees.