Money In Relationships – Your Children And Your Money

They say, you can have children, or you can have money, but you can’t have both. Well, that’s not exactly true, but children are, in fact, one of the most expensive things you will ever bring into your life. As of 2017, the average American will spend $233,610 to raise one child from birth to seventeen years old. (See the 2017 report from the U. S. department of Agriculture.) If you pay for college, that is even more money on top of that, potentially more then doubling your investment. All that expense is made up of 29% housing, 18% food, 16% childcare and education, 15% transportation, 9% healthcare costs, 6% clothing and 7% on everything else. It comes to over $13,000 per year, per child. Obviously that goes up or down depending on where you live and how you live. Some parents pay much more, and some get away with less. Now factor in that the data for that survey was taken in 2015 and consider inflation rates. Yikes!

Inevitably, as you spend an average of over a thousand a month on your precious baby, they will not appreciate it. You will find yourself frustrated at how little they seem to understand money, what it takes to earn it, and how to spend it wisely. The typical path looks like this:

What do we mean by the “value of money?” As soon as we see our children waste money, we start using that phrase. “That kid doesn’t know the value of money.” Literally, the value of money is just the actual value. Five dollars is five dollars. What we really MEAN by the “value of money” is the work that it takes to get that money, and what you can then do with that money.

Allowances are typically the first method that parents use to teach their children about money. You give them some money each week or month and see if they can learn how to spend it well. According to the American Institute of Certified Public Accountants, in 2019, two thirds of parents gave their children an allowance at an average of $30 a week. Four out of five of those parents expect their children to do chores around the house to earn that money. Three quarters of parents in that survey said the allowance was to teach “financial responsibility” and the “value of money”.  But only 3% reported that their child did anything remotely responsible with it.

Have you tried this? How did that work out for you? If you are laughing right now, then you have truly learned the lessons of this phase of your financial life. They spend it on things that delight them, not on what you wish they would spend it on. They spend it, in short, on things that you would deem useless, frivolous, or wasteful. You are certain that you have failed. You try to teach them better. They don’t seem to get it. They need to save some! They need to research their purchases and not be so impulsive! They need to think about their future!

If you step back, you will see that you are expecting them, at all of eight to maybe eighteen years old, to act like a fifty year old financial expert. Deep down, you are expecting them to NOT remake the mistakes YOU made with money. That is what is really going on. You want them to do better than you did so that maybe life won’t be so hard for them. Harsh but true.

Seeing that allowances didn’t do the trick, you move on to encouraging actually working for money in the real world. Once they turn fifteen, they are eligible to work in most localities. State and country laws vary, so be sure to check the law in your area.

In a study by the Hamilton Project and Brookings Institution, we see that in 1979 a full 60% of teens aged 16-19 worked at least part of the school year. By 2019 that number was 35%. This is attributed in large part to increased homework, more AP and dual enrollment style classes and generally school becoming more competitive and work-intensive.

For those high schoolers who do work in the real world, they find themselves quickly more mature than their counterparts. Their work life may significantly influence their friend set, as they opt for friends who understand what it is like to juggle work and school schedules, and deal with difficult customers. You may find your relationship with them takes on a different feel as well. When they have their own money, and are not beholden to you for that money, you no longer have any real authority. This is actually a good thing. Breaking the power dynamic between you can your children in this way give you an opportunity to let them practice financial independence while still under your roof. They will not need an allowance. They can be responsible for their own fun money. You can stop being the perpetual ATM. The trade off is that you don’t get any say in how they use that money. They might buy a phone or even a car. They might spend it frivolously. Or they might save it like a squirrel in Fall. Usually they do a little of all of those things. This is a good time to let them make their own choices. If you are feeling the need to control their decisions, that is an indicator that YOU need to spend some time exploring your own need to control, not exacting authority over someone else’s hard earned cash. You have to let them go… you might as well start now.

Rest assured that your children will make all manner of financial mistakes, and social mistakes, and career mistakes. We all do. They will find their way; some sooner and some later and some after great hardship, but they will find their way.

As they find their way, and make their mistakes, they will have messes to clean up. As a parent, it is hard to watch them heading right for a train wreck and unable to do anything about it. You are Casandra. You see the future and try to warn them, but they don’t believe you. Or maybe you were not in the loop at all. And now here they are. They failed to plan, they failed to save, or they failed to act. They may be faced with a surprise repair bill they did not see coming, or they are late on their regular bills, or seemingly down on their luck. They just need some cash this one time. And then another time. And maybe another time.

Each time they come to the Bank Of Mom And Dad, they are sad and distraught. You can’t stand to see your baby suffer. You can’t stand the conflict in your own heart. You want to help, but they need to learn. You are not sure exactly where your responsibility ends. It IS just this one time, after all.

Sometimes, you can help and not hurt, but sometimes your help is actually hurting them. For example, if they think they can always come to you for money, they will not save and prepare for potential disasters. If you take the safety net away, however, they have their panic moment and might start saving for both the joys and disasters that lay ahead for them. When major disaster strikes, like a medical problem or literal natural disaster, you can step in and help without it becoming a habit. The difference is in the cause. If they caused their own mess, it is psychologically better for them to be the one who cleans it up. If they did not cause their own mess, you might choose to help. A cancer diagnosis or tornado that destroys their home is not their fault. You are not standing in the way of karma here. Helping in any way you can, financial or otherwise is a good idea and will strengthen your relationship. Past due bills and unexpected repairs, however are the result of their failure to plan. If you step in there, you are preventing life from teaching them the lessons they so desperately need. As a result, your relationship will suffer.

So why does the relationship suffer? When you clean up their messes, you stunt their independence. Subconsciously, they may resent you for it. I have seen parents who continue to pay for their grown children’s cell phones and rents, only to have their children repeatedly insult them at every opportunity. When independence is stunted, maturity is delayed. Your relationship with your children is meant to evolve, not stagnate. The result of paying for their life or cleaning up their messes, beyond a certain age, is a grown man or woman acting like a thirteen year old.

Each of us on this earth wants to be free, independent and capable. That skill is not inherent. We have to learn to be free, independent and capable by getting it wrong enough to know how to then get it right. In short, they have to make their own  mistakes and you should let them. Yes, it is painful to watch. Stay out of it anyway.

So why do parents do this? Why do we pay for too many things, for too long? Why do we keep cleaning up their messes? The answer is personal to each of us, but the most common causes are guilt and unworthiness. YOUR guilt and unworthiness, to be precise. Divorce is a common cause of guilt leading to financial disfunction with your kids. Divorce, your own childhood experiences, your current marriage and other factors can also lead to feelings of unworthiness. In feeling unworthy of love, you might attempt to buy your children’s love, subconsciously convinced that if there is no financial dependence then they would have no reason to love you.

In these situations, it is not your child that needs adjustment… it is YOU. Because it is not at all about the money. Isn’t that always the case? Work to let go of your guilt and unworthiness. You are worthy. They are OK. You have nothing to be guilty about. The relationship possibilities with an fully independent child are so much greater than than you realize. For now, suffice it to say that no relationship can be pure when money is involved. Let this tether between you drop away, and foster a deeper and more pure connection that will reward you both.

When you are ready to cut the financial cord, you can gradually step your kids towards independence, or you can end it all at once. The older they are, the faster you will want to help them find their feet. If you can start your kids on a path to financial independence early, you can step them down one bit at a time. For example, they can get a job when they turn fifteen or sixteen. Once they have some income of their own you can stop giving them an allowance. They can start paying for their own fun. By eighteen they can cover their own car insurance, cell phone plan, and everything else. Imagine that! The maturity your children will gain by being financially independent from you will astound you. This kind of early and gradual method is just one way. Some parents like to step their children down to their own financial responsibility during the college years, or shortly thereafter. But the longer you wait, the harder it will be, and the further they will have to go to catch up in maturity. There is something out paying your own bills that makes you grow up quickly.

But suppose that you find yourself in the situation where you are paying your grown child’s bills. Suppose they are done with school and somehow still on your payroll. They might even live with you. The psychological and financial effect of this arrangement is detrimental to both of you. Apparently you are in good company, however. In a 2013 study by Pew Research Center, we see that more than a third of middle aged parents were providing the primary means of support for their kids and it was not because they were in school. It can get really out of hand, delaying or outright preventing your own financial independence or retirement plans.

When it comes down to it, you might have to rip the bandaid off and stop supporting them completely in one fell swoop. In this case, when they have overstayed their welcome, the best solution is a clear deadline to be on their own. Set a reasonable expectation. It might be one month, or two, or even three months. But don’t let it drag on. Make it clear that this situation is costing you your future, and costing them their future too. Help them outline the steps to independence. Help them find a room to rent somewhere. Help them find jobs in their industry. Help them learn how to grocery shop, budget and clean. Make it clear that you will always be there to coach them, but you cannot fund their life anymore. Express your confidence in their own ability to manage their life. And stick to your stated deadlines.

As the deadline approaches, they will take more action. They may also give you a lot of grief. You see, getting on your own for the first time is scary. It’s terrifying, really. This abject fear of being on their own will cause some friction in your relationship as you approach each major deadline. Hold firm, and be kind. Simply refuse to engage in any conflict with your child. Be a fountain of peace and joy… a fountain with clear iron-clad deadlines… and love.

Reward each step towards independence. Celebrate getting a job, getting their own space, taking over their own bills, and so forth. Treat them as the adult they are becoming: independent and capable. In many ways they will be looking to you to tell them they are capable of all of this. If you are confident in their ability to be on their own, then they will be confident too.

After a successful launch, your relationship will change. It will go from parent-child to something more peer to peer. You will become a coach or mentor they can call on for advice as needed. The complete lack of any financial expectation in your relationship leaves it open, loving and pure. They call because they want to. They visit because they want to spend time with you. It is a more pure and more enjoyable relationship than the money-driven one you have now.

Sometimes, your successfully launched child comes boomeranging back into your home and/or your bank account. This can happen many ways. A major illness with a long recovery, or unexpected layoffs can lead a once independent grown child to fall back into dependence. Layoffs are not really a great excuse but long term medial recovery is a hard one to say no to.

Having been independent, they might resent needing your help again. In these cases, clear boundaries and timelines will help everyone involved avoid the feelings of resentment and unworthiness that are common in this situation. Keep it clear and temporary.

Sometimes, instead of physically returning, your child might simply attempt to manipulate you for money from afar. I can imagine your shock at the thought. You precious baby would never lie to you or take advantage of you! … or they might. Look, not everyone on this plant is a nice person. Some people are assholes. And one of those assholes might be your child. It’s not your fault. They are who they are, making the mistakes that they need to make and reaping the consequences. It is entirely possible that your sweet precious angel may lie to you, claiming that they need money for some really great cause, and then use it for something else. They might be particularly nice to you, or guilt you into giving them money for an actual need, and then turn around and be down right mean to you once they get the money. This too is manipulation. Chalk it up to an expensive lesson… for YOU. The lesson is this: no relationship is pure or fully truthful when money is involved.

Just as you must plan for the inevitability of your parents’ passing, you must also plan for the inevitability of your own. The only certainties in this life are death and taxes and they both require financial planning. Planning for your own exit from this world can be such a morbid task. According to a 2017 study by Caring.com, only 40% of American adults had a will or a living trust. That number jumps to 81% of those over the age of 72. But that means 9% of Americans over 72 years old don’t have any plan at all.

The average life expectancy in the United States is 78. But that does not guarantee you will make it that far.  Having no plan will leave your children in a mess of probate court dates and paperwork that will not have them thinking of you fondly. A 2018 survey by EstateExec found that the average estate takes 16 months, 570 hours, and $12.4 thousand dollars in legal and accounting fees to settle, and is worth $50,000-$250,000. Even more pertinent is that 44% of all families devolved into conflict during this time.

Most of that conflict looks like children and grandchildren fighting over inheritance, or one person getting greedy, misappropriating items or spending cash before the will can be read. There is nothing like money to really reveal a family member’s true character. You might avoid sending your family into this type of conflict by:

You might also consider distributing the majority of your estate while you are still alive. For example, if you want your house to go to your oldest child, and your vacation home to your second child, you might sign over the deeds to them sooner rather than later. Or you might simply add their names to the deeds, making it easier to transfer later. Consult a good wills and estates attorney in your locality about that.

What you should NOT do is avoid the issue. You WILL pass away someday. You need a plan. Think ahead about how you want your money and other assets to be distributed and get a good attorney to write it up correctly. That will include some hard choices, such as who will be in charge of your finances if you are incapacitated. It’s a vulnerable position to be in. It comes down often to a question of which of your kids is best with money. You can see the conflict brewing already! Leave very specific and clear guidelines for how you want everything handled. If all your kids know what you would want, they will keep the chosen child honest.