Five Ways to Raise a Financial Adult

Many children are dominated by “Helicopter Parents.” They lurk in the shadows, concealed in their mini-vans looking to monitor and butt into virtually any life situation their child encounters. Besides being humiliating and demeaning to the child, there are worse side effects to this behavior. Children will never learn how properly manage their finances if a parent is always ready to interfere and save the day.

In a terrific book by Julie Lythcott-Haims, How to Raise an Adult: Break free of the Overparenting Trap and Prepare your Kid for Success, the evidence could not be clearer. Not allowing kids to experiment and be self-reliant because of extreme parental interference will lead to many bad outcomes. These include:  passivity, dependency, and closed mindedness.

Overparenting can have negative effects on a child’s personality, but the impact on future financial management is devastating, as well. While parents need to back off and stop living vicariously through their children, there are positive steps to take to prevent this potential disaster. Here are five financial strategies to implement before your child becomes your own personal ward of the state.

1. Make them work.  Part time jobs and chores are great character builders. They provide numerous benefits, both monetarily and towards character building.  Constantly shuttling a child to tournaments and recitals misses the opportunity to teach a child that recreation and leisure activities, such as sports and hobbies, are only one facet of a balanced life.  Packing groceries may not be glamorous, but work encourages responsibility and builds confidence. The child will learn to develop a work ethic and meet a wide variety of people they would normally have any direct contact with. More importantly he/she will understand that their “wants” in life are not the center of the universe.  While it is true that all work and no play make Johnny a dull boy, the converse is: All play and no work will make Johnny a very incompetent boy.  Kids need to do things for themselves in order to get ahead in life; there is no shortcut around this.

2. Set up a bank account. This will not only teach your child the value of saving, but will provide many other benefits. Most important, it will make them less dependent. Having their own funds  — and having to manage those funds — will enable the lessons of wants versus needs and budgeting to come to life in real time. Individual decisions will have to be made and your child will soon learn he cannot have everything.

3. Establish an investment account.  The most important lesson regarding investing is the value of compound interest. Those who have the most years ahead of them benefit disproportionately from this cardinal rule. This account will also teach your child the invaluable lesson of learning from mistakes. This is considered to be heresy to a helicopter parent. Let your child choose some investments with small amounts of money even though they may experience losses (which can be an invaluable experience). It may prevent them from making the same mistakes when they are much older and have a great deal more to lose.

4. Sign up for a credit card. This act will pay numerous future dividends and can be started when your child is in high school. Not only can it teach the danger of borrowing more than you can pay back, it can prevent future financial mishaps. Student loan debt is an immense problem in our nation. Learning the dangers of debt mismanagement is much more valuable when borrowing hundreds of dollars than it is when borrowing tens of thousands of dollars in student loans. Allowing your child to make some mistakes will provide the most benefit. This will cement the idea of the dangers of credit card misuse. All of these lessons will go for naught if you step in and pay your child’s bill. This will only reinforce the dependency that needs to be eliminated.

5. Choose an inexpensive state college over an overpriced private institution. Not only will this save a ton of money, it will destroy the idea of the illusion of control that hovering parents are so desperately trying to instill. The idea that an expensive private college will guarantee future success is ludicrous. Try telling this to helicopter parents who spend a fortune on private tutoring and college counselors in order to insure Junior’s success.  The sooner your child learns that the most valuable qualities found in successful people are resiliency and perseverance, the better. Oddly, these are the two qualities that helicopter parents try their hardest to destroy. Calling your son’s college professor to argue about a poor grade doesn’t breed self-reliance.

Implementing these strategies will not only increase the probability of  success for your child, but an added benefit is the boat-load of money saved on not having to take anti-depressants and anxiety medication. The University of Tennessee completed a study and found the correlation between future usage of these drugs by children of helicopter parents to be quite high.

Maybe the disparaged world of letting children create their own games, not scheduling every second of their day, and allowing for some danger in their life would create responsible adults.  It often seems that many kids who had everything planned for them cannot live for the moment. Even if they could, that moment just might be located in their parents’ basement.