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They’re becoming adults, they’re graduating or they’ve pointed out they are now 18 and can make their own decisions. And you silently wonder when they’ll start making their own money, too.

How long do you support your children financially? For many baby boomers, the answer is unclear. Many report that they are still supporting grown children. Retirement planners sometimes worry about it. But when, exactly, do you start encouraging your kids to be more financially independent?

Author and financial coach Gail Perry-Mason has an answer: age 14. First she clarifies that she’s not talking about cutting anybody off at 14. “You wean them off,” she said. While they are learning about work and money, parents continue to provide what they need, but not everything they want. Even before they are teens, children should know that they are “financial liabilities,” in Perry Mason’s words. At 14, when they want something, they should be asked what it’s worth to them. “When they ask for any item, ask them, ‘How much are you willing to contribute?'”

“They need to be contributing members of the family,” she says. And where do they get this money? “If kids need money, they will find a way,” she says, whether it’s babysitting, chores, mowing lawns or other endeavors. But instead, parents often just give kids things when they ask. “They’re not hungry enough.” Perry-Mason says we’re raising a generation of impatient consumers who don’t understand why they can’t have what they want — now. And she doesn’t blame the kids for this.

Better, she says, is for parents to make sure kids “have some skin in the game.” If they’ve had to save and sacrifice to buy something, she says, they take better care of it.

Education is no different, Perry-Mason says. Kids will value it more if they also have an investment in it. Her own children had to find scholarships — and finding the right ones to apply for, writing the essays and meeting the deadlines can be a job in itself. Other ways to help pay the bills include entrepreneurship or part-time jobs. But if students can’t seem to find the time to work or apply for scholarships, parents often put in the time instead, working extra hours or retiring later. And, as many a financial adviser has said, “there are scholarships for college but not for retirement.”

Teaching kids to contribute can be counter-cultural. Lots of other parents are doling out money or paying tuition. But even if you have the means to do it, it’s a bad idea, Perry-Mason says. “Warren Buffett made his kids work and earn. Who are we not to?” She added that though he is extremely wealthy, the vast majority of Buffett’s wealth will NOT be left to his children.

Financial Milestones

Other than age 14, Perry-Mason identifies the major milestones toward financial independence as getting a first credit card (as primary cardholder) and college graduation, though not necessarily in that order.

The first credit card can come with a nudge from a parent who thinks the teen or young adult is ready and can get approved, normally requiring that he or she have an income. You can encourage your child to apply, and if the application is approved, celebration is in order. (If it’s declined, you can teach him or her how to appeal and/or find out the reason.) You celebrate this financial milestone and, at the same time, have the young person return to you the “authorized user” card that is no longer needed.

If the application was declined, Perry-Mason recommends getting a secured card, and going over how to use it, how much can be safely charged and the importance of repayment. Then, you have a similar celebration — one that also includes the surrender of any parental credit cards.

After graduation, it’s OK for a young adult to return to live at home for a time, she says, but he or she MUST contribute to the household, whether it’s in services (preparing meals, doing laundry, grocery shopping, mowing lawn) or payment of rent.

She calls these young adults — and her sons are among them — Generation Why. As in “Why do I have to put gas in the car — it’s your car? Why do I have to pay rent?”

But if she “flips the script,” she says, they suddenly understand why. She tells them when she is old, she plans to move in with them, raid their refrigerators, expect laundry service and take lots of long, hot showers. Because turnabout is fair play.

But mostly because, “I want them to be better than me,” in ways that are not limited to financial know-how or credit scores. And she knows that carrying them on her shoulders is no way to teach them to stand tall.

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  • http://www.famzoo.com/ Bill Dwight @FamZoo

    With you on everything but the credit card. No need to run the risk of going into debt. I’d recommend a prepaid card instead.

    • http://www.credit.com/ Credit.com Credit Experts

      That’s certainly one way to do it. But if you want to help them get a good credit score — and you might, because you might not want to co-sign a loan or lease — using credit will help them get a higher score. A prepaid card does have the advantage of forcing a kid to stay within a budget. Many — but not all — carry high fees. Some are designed to give parents access to transactions, too, so it can be a very good idea for training purposes. However you do it, you want to teach them to be smart money managers.

      Credit expert Barry Paperno points out in this story you could also make them an authorized user without giving them the card or card number (so no risk to your finances):
      How to Give Your Kid a Good Credit Score

      • http://www.famzoo.com/ Bill Dwight @FamZoo

        Some credit cards have high fees too – so, as with any financial product – you need to do some due diligence and that’s a good thing to teach your kids too. Good point about prepaid cards not building a credit history. I like to start kids with prepaid then, after they’ve proven proficiency, add a credit card that is used for a VERY specific purpose – like gas – and paid off promptly each month. There are also ways to build credit history without a credit card. E.g., via rent payments through a service like WilliamPaid or a Credit Builder Loan from a local CU.

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