01 Feb Money Management Training Throughout Your Child’s Life
Are Millennials good at managing money? That one question is the object of hot debate among many members of today’s “older and wiser” Boomer generation. They say Millennials acquire too much student loan debt, stay in their parents’ homes way too long, and don’t buy their own homes early enough. On the other hand, that may be the mores of a post-war generation being forcibly applied to another.
The other interpretation is that Millennials are doing just fine with money because they are not so focused on it as their parents were. While older generations learned about saving money for college, houses, retirement and their children, this generation seems to pay closer attention to what is important to them, and does not worry so much about draconian scenarios.
Which view is right? Nobody knows for sure, but perhaps the answer is that important lessons can be learned from each generation which might make it easier to provide money management training for your children. Here are some key takeaways:
• Money is important, but it is not all-important: Having money is, of course, a very good thing. It helps us to provide food, shelter and clothing for our family, and also to enjoy life. But the Millennials seem to say that it shouldn’t be just all about the money. They are not so all-focused on working and saving money that they forget about the enjoying part. That is why you might see them delaying home purchases, taking lower-salary jobs with more personal flexibility, and attending a lower-cost college closer to home that doesn’t require them to acquire a huge pile of debt.
• Money management is a life-long process: While Baby Boomers may have received a small allowance, or looked for part-time jobs in their teens, they really didn’t learn much about the money management process. Their parents took sole responsibility for the family’s financial welfare, and the children were kept pretty much in the dark. Very little was known about how much was available for college, or whether college was a possibility at all. Now, parents can be more open about money with their children. When children learn how money is earned, invested, saved and spent, they have a much better skill set to take into their own lives.
• Credit is a double-edged sword: While the advance of the credit card has been a boon to purchasing power and convenience on the one hand, it can also cause the swift downfall of a family’s financial future. Previous generations learned to save for every purchase because there was no other alternative, but today’s credit environment has vastly changed that mindset. Purchases can be made with the swipe of a phone, and educations can be bought with a signature stroke on a student loan document. Little thought is given to future consequences. Now the better approach is to really determine whether a large credit purchase or college loan investment can be balanced against the family’s future buying ability.
• College is a family choice: At one point, parents simply told children whether they were attending college and where. That somehow morphed into children making outrageous demands that sent everyone’s finances into a freefall. Now, parents and children start thinking about the college question much earlier, try to understand the total cost/benefit ratio, and start making plans well in advance. They learn about financial aid together, make plans to file the FAFSA as early as possible (and to do it every year!), and seek scholarships that may lighten the load. There is a more open environment for talking about which colleges are budget-appropriate, or thinking about ways to pay for desired schools that are just slightly out of financial reach.
Nobody really knows what changes are ahead for future generations, but these money management concepts seem pretty fundamental for all financial areas of life. Some states are implementing policies of free tuition at public institutions, while certain presidential candidates promise a free education for all. The only certainty is that a child who has a solid grasp on financial fundamentals will be better able to manage anything that lies ahead.