We want to give our kids the world, but at some point, they're going to have to take the reins. But the question is: when? How long should we be supporting our children financially, and at what age do we start to cut the cord? Clinical psychologist Dr. Sheila Forman believes that parents are actually doing a disservice to their kids by not expecting them to pay for anything.
"Children of all ages must learn to be financially responsible," she says. "They must be taught good financial skills and develop healthy money habits. This can only happen if they participate in money matters. So even the child whose tuition you are paying should be responsible for paying their own bills, balancing their own checkbooks and being accountable for the money you are providing." We asked Dr. Forman to weigh in on children and finances, and here's what she had to say:
What is the appropriate age to encourage your child to get a job?
Encouraging your child to earn his/her own money is an excellent opportunity to teach children about money and to help them build good financial skills. This earned money can be done either at home or at a job outside the home. There are laws in each state which dictate at what age a child may earn a wage and under what circumstances. But generally speaking, a child under age 14 could earn money at home doing extra chores or helping a parent with a work project. Children over 14 can start to look for work outside the home such as babysitting and dog walking. When the law permits, they can look for work in a store or other venue. Whatever job the child decides to take, parents will need to discuss the job with the child and establish limits so work does not interfere with school, study time, and family activities -- which are equally important parts of the child's life.
What is the appropriate amount of allowance you should be giving your teenager?
The size of an allowance truly depends upon the teenager's level of maturity, the items it will cover and the amount you as a family can afford. The teenager can help set their allowance by identifying how they will spend it and ranking those needs in order of importance. By including the teen in the decision-making process, they learn that money is limited, that income must first cover needs, and that the family's financial situation affects the amount each member can use. That being said, it is also important that an allowance include enough money to cover some fun expenses. A good rule of thumb is that the allowance be large enough to cover the agreed upon basic needs, plus a little extra for savings and fun spending. Once you have agreed upon the amount, also set a time to reevaluate it.
At what point should you take away allowance?
The usual answer to this question is that allowance ends when the child is earning enough money to meet their financial needs. However, if the child enters college or if his first job doesn't pay enough, then temporarily continuing an allowance is perfectly okay.
Should children in college (full-time) be expected to carry their own weight financially?
My answer to this question depends in part on the character of the college student. If you have a student who is responsible, diligent, ambitious and focused, and if a family is in a financial situation which would allow the college student to avoid having to work during their college years and instead be able to focus exclusively on college life, that would be my recommendation. Of course, he or she could always take up a small part-time job, giving them the extra spending money if they desire.
If the family cannot do that, my next suggestion is to have the student take out financial aid which they will then repay after graduation. If financial aid does not meet all the college student's needs, then a part-time job to make up the difference is necessary.
But, if your beloved college student is lazy, unfocused, and undisciplined, then making them responsible at least in part for their financial weight is very necessary. This particular student needs to learn the financial facts of life and that won't happen if Mom and Dad are there to carry the load.
What about grad school or law school?
My answer for this question is basically the same as for the question above with one caveat. If the student is an older student going back to grad school after working for a while, I believe it is the student's responsibility to pay for at least part of their grad school experience. That's what I did. My folks generously paid for my law school education after college but when I went back to get my doctorate ten year later, I footed the bill.
How should you cut your child off?
The first question before "how" is "when" should you cut the child off. And unfortunately with today's economic realities, that is sometimes later then you would think. A generation ago, most college grads had the economic winds at their back. They graduated into a decent job market and enjoyed strong appreciation of their homes and stock portfolios. Today's grads face more economic uncertainty, bigger debt loads and more financial temptations than ever before.
But the line between helping and enabling is a fine one, indeed. One bailout can lead to another, as children become dependent on their parents instead of becoming economically self-sufficient.
If you need to support your child after graduation, set some guidelines and limits. For example, offer a particular amount of money for a designated amount of time and put certain conditions on it such as they continue to look for work, or they save 50% of their income, or they seek a higher paying position.
If your child really is trying, give them the lead time they need, but if you've got a loafer on your hands, kick them out ASAP!
As for the kick, have a time frame and strategy. Set a target date by when they must be out and then stick to it!