5 ways dads can hurt kids’ finances when they want to help - KUAM.com-KUAM News: On Air. Online. On Demand.

5 ways dads can hurt kids’ finances when they want to help

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By Andrew Housser

As Father’s Day approaches, plenty of jokes ensue about getting another necktie, and advertisements may show plenty of barbecue aprons changing hands. But when it comes to actual parenting, one thing that is very important to most fathers stand out: that their children establish financial security so that they can support themselves throughout their lives.

Sometimes, though, fathers can inadvertently teach bad habits. Fortunately, it is never too late to teach the right lessons. Here are five missteps well-meaning fathers might make, and how to change the lessons into positive ones.

1) Giving kids money. Teaching children how to handle small amounts of money starting at a young age is an excellent way for them to begin learning money management. But kids should earn that money, rather than be handed cash whenever they ask. Parents might establish expectations that kids pull their weight around the house and receive allowance only when they are working as part of the team, for instance. For larger purchases, encourage them to earn some of all of money on their own as appropriate for their age. Offer loans only rarely, and use consequences to teach how debt works. For example, charge interest or require an extra chore to repay the loan, or put the toy on “layaway” so that the child receives it when he or she makes the final payment.

2) Buying them a car. Think twice before buying a car for a teen who has just received a driver’s license. Insurance premiums for teen drivers are high. In addition, Geico estimates that 1 in 5 teens has an accident in their first year driving, making those premiums rise more. Several studies have found that teens who have their own cars are twice as likely to crash, and more likely to speed and to use a mobile phone while driving.  In fact, distraction is part of more than half of teen crashes, according to a 2015 study. Instead, allow teen drivers to periodically borrow the family car, especially during their first year with a license.

3) Paying their tuition. Many parents aspire to paying their students’ full college tuition. But especially for middle-class and lower-class parents who must struggle to help pay for college, there is news that this practice may actually be counterproductive. In fact, the more parents pay for their children’s college tuition, the worse those students perform, according to one 2013 study. Often, the study found, students who do not work during college simply have more time to party. And when college is over, they may not have the incentive to find a good job on their own. Do your children a favor and allow them to work to fund part of their own education.

4) Paying their rent. A 2015 survey found that 36 percent of parents expect to support their child for two years or more after he or she graduates from college. Mirroring that data, in 2012, 36 percent of millennials were living with their parents. There is nothing wrong with helping your kids get a start in life, but be sure they also are learning to take responsibility. Supporting them for years while they live in a city where they cannot afford to pay their own rent – even with roommates or a second job – gives them an unrealistic perspective on their future. Instead, encourage them to choose a city or an apartment that they can afford with earnings from their own work, where they can save money and repay student loans. If they live at home for a few months or years, charge rent – even a nominal amount – so they can work toward supporting themselves.

5) Going into debt on their behalf. Financial advisors warn parents not to put their child’s finances before their own financial futures. You might think you are helping your child if you borrow for their education or take out a second mortgage to help them start their career. But if you ultimately jeopardize your own security, you are doing them a disservice, too. Instead, teach them the value of living within their means. This includes finding alternate ways to finance their educations. They might need to attend a different college, work while they study, or otherwise minimize their student loan debt. The end result will be greater financial peace of mind for all.

As with all aspects of parenting, setting a good financial example is important. Everything you do can help children learn the money lessons they need to learn to have a productive, successful life, without significant debt.

Andrew Housser is a co-founder and CEO of Bills.com, a free one-stop online portal where consumers can educate themselves about personal finance issues and compare financial products and services. He also is co-CEO of Freedom Financial Network, LLC providing comprehensive consumer credit advocacy and debt relief services. Housser holds a Master of Business Administration degree from Stanford University and Bachelor of Arts degree from Dartmouth College.
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