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By Suze Orman
I know you will do anything for your kids.
But good parenting that helps your children grow into financially secure adults requires more than that. It requires sacrifice, discipline and balance to give your children a great life, while setting them and yourself up for financial success.
What is equally important to a child’s happiness is that every parent accepts that putting their own financial needs first is vitally important.
Yes, you read that right. I am telling you that one of the biggest financial gifts you can ever give a child is to make your own financial needs a greater priority.
This is the opposite of selfish. I promise. Let me explain.
The most caring gesture you can make right now is to focus on building retirement savings.
The more you are able to save in a workplace retirement plan, or an Individual Retirement Account (IRA), the less likely you will need to rely on your kids for financial support decades from now when they are adults, and you are retired. I know being a financial burden for your grown children is not your intention. But I also know there are so many adult children saddled with this extra responsibility. Perhaps you are providing financial assistance to your own parents right now?
If that is not the future you envision for your children, then I need you to stand in your truth and commit to making smart money choices that will give you financial security in retirement. Saving for retirement must always, always, always be a priority over saving for college.
I also never want you to borrow for their college if it means you will need to curtail your retirement saving, or if you won’t be able to pay back the loan before you are 60. Borrowing student loans, whether through federal or personal loan avenues, can be a slippery slope to unpayable debts. For instance, the federal Direct PLUS loan program—which allows parents to borrow for a child’s college costs—is a program with good intentions that is nonetheless dangerous. It allows parents to borrow whatever amount of money they need to cover college costs, without checking if the parents have the ability to repay the loan. Can you imagine a mortgage or car loan lender approving loans like that?
The best school is the one that is a fantastic fit for your family’s finances. Any borrowing should be limited to what the student can borrow through the federal loan program. No private loans should ever be borrowed to pay for schooling.
Making sure you and your children don’t bury yourself in student debt is an act of “saying no out of love, rather than yes out of fear.” Building financial security is an act of love that will help your children decades from now, at a time when they likely will be in the midst of raising their own families. Don’t be misled by a fear that saying no to “doing anything” for your kids is wrong or selfish.
As you learn to say no to the things you shouldn’t do, there is plenty you can, and should do, to raise money-confident kids.
The best lesson may be the hardest for some of you: Lead by example.
As if I need to point this out, your kids are sponges. If you are not overspending you are sending a message. When you have clear lines between wants and needs, you are setting such a valuable tone for their development.
It’s not just about everyday spending, it’s also shown in your big ticket expenses. Did you buy a car that meets your family’s needs—transportation—or did you give into what you and they wanted: The more expensive model with more bells and whistles that now means you have a much higher monthly payment, taking dollars away from other goals. Is your goal to spend as much on a home purchase as the lender is willing to let you borrow? Or are you focused on spending no more than what is needed to own a home that meets your family’s needs.
If your child earns an allowance, or receives money as gifts for birthdays and holidays, there is never too young an age to start laying the foundation for three core money habits: Always save. Always Share. Always Spend. Surprised by that last one? This is all about teaching balance and priorities. A child should have the freedom to spend money that is theirs. That is important! The challenge is to decide how much goes into the spending bucket, so there is money for the saving and charity buckets. It is up to you to set the guidelines for a young child. My hope is that you make each bucket equally exciting and compelling. Saving should be presented as something amazing they can do for themselves, to help themselves.
If you have a young adult in your life who is at least 18 years old, be sure to let them know there is a great savings opportunity through my Ultimate Opportunity Savings Account with Alliant. Once they join Alliant, and save at least $100 a month for 12 consecutive months, they will earn a $100 bonus payment to their account. That’s a fantastic deal to help them build up their savings.
Want to learn more about how to prep kids for a healthy financial future? Check out these other articles:
Join Suze on the Women & Money podcast (and everyone smart enough to listen) as she answers your questions and shares invaluable money lessons every Thursday and Sunday. Subscribe for free on your favorite podcast streaming app today, and don't forget to submit a rating and share the podcast with family and friends.
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