We’re reading more and more about the escalating costs of college and how unprepared young adults are to manage their own money. We’re not judging. We were financial nightmares ourselves. In hindsight, we feel we weren’t given sufficient tools to be prepared. Blame that on upbringing or education or whatever.
Personal finance education isn’t coming from school anytime soon. What’s a parent to do? What if you treat your high school-aged child as a roommate? Ha!? What? Why would you do that?
Hear us out. Studies show that when students first get into college, they’re not financially mature. They don’t understand the value of a dollar. They don’t understand why they should be cautious about, spending, school sponsored credit cards and debt. They aren’t prepared to pay bills or share expenses with their roommates.
As CNNMonday reports, the average allowance paid by the 61% of parents who pay one is $15 a week. Most kids don’t save this money. 81% of parents say they’ve discussed money management with their kids. What does this really mean when allowances are spent almost as soon as they’re received? This suggests there aren’t enough real-life examples for children, only theory. CNNMoney suggests using allowances as a “gateway to budgeting”, reserving the money for going out with friends and short-term expenses.
What if parents took this further? The idea is to provide a real-life example of the value of a dollar. If, when students get into high school, they are treated as a roommate, they’ll more quickly become financially mature. Maybe home shouldn’t be a free ride.
What do we mean, exactly? Have teenagers pay bills. Maybe have them pay all or a portion of their phone bill. Make them responsible for covering a portion of the groceries they eat, maybe provide cabinet space for their own food. Make them pay for gas, car insurance or part of the car payment. They could even pay “rent” and if they miss a payment, they sleep on the couch.
This may require a bigger allowance or them getting a part-time job. Of course, children can’t be responsible for covering all of their expenses without a full-time job. Parents are still responsible for providing most needs, so make sure they eat and sleep well.
Parents are also solely responsible, apparently, for providing their children with personal finance education. We think this may be a helpful way to do so.