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3 Scary Signs That Your Child Might be On the Road to Financial Disaster

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Jeff Cuellar

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Growing up, I heard the word “no” every time I wanted something as a kid. And when I really wanted something (like those awesome Ninja Turtles action figures – remember those?), it always came at a price – such as cleaning the house (restrooms included) or cutting the grass in the 37°C heat!

Nowadays, kids get smartphones, credit cards and monthly allowances that are probably more than what I earned working retail while attending University.

Seriously, it’s no wonder some kids end up in financial trouble before they even turn 20! If you want to avoid situations where you have to constantly fix your child’s financial problems – keep an eye out for these 3 scary signs that your child might be on the road to financial disaster:

 

#1 Your Child Asks for the Latest…. EVERYTHING!

The newest generation has lived life without having to want for anything – they have good food (Singapore food is some of the best in the world), quality shelter (HDB flats), reliable transportation (when MRT isn’t having rail faults) and of course… the latest technological gadgets money can buy.

Of course, as parents, we have this tendency to want to provide more for our kids than we had growing up. There’s nothing wrong with that – until your child starts to turn into an entitled brat who wants the latest EVERYTHING.

I’m talking about the latest Apple products (yes, your child with the iPhone 5S will be asking you for the iPhone 6 soon enough), brand name clothing, shoes and electronics (computers, tabs, gaming consoles, etc.).

The worst thing you can do is say yes to all of your child’s requests. Why? Because you’re becoming an “enabler” for your child’s need to compete with other children – and that can lead to emotional spending problems that can really wreck your child’s finances down the road. Worse, you child might see you as a financial safety net who will write blank checks to cover his/her money mistakes.

What’s the best thing you can do? Either say NO or make your child work for whatever he/she is asking for.

 

#2 Your Child Keeps on Blowing His/Her Monthly Allowance

There’s nothing wrong with giving you child a daily/monthly allowance to cover daily expenses such as food or personal purchases. However, if your child keeps on asking you for money by the middle of the month because he/she blew their money on visits to the mall – that should scare the hell out of you.

For one, your child doesn’t know how to create and follow a budget – and that’s something you should be teaching your child instead of enabling your child’s bad spending habits by topping up every time he/she asks for more cash.

If your child gets into the habit of blowing his/her allowance as a student in secondary school, what makes you think he/she will learn good financial habits in polytechnic or university? What do you think will happen when you child starts working and *Shudder* gets his/her first credit card(s)???

Teaching your child how to budget is only one way to remedy this potential financial problem. Another way to approach this issue is to act like a bank.

If you kid(s) want to “borrow” money because they went over their budget, change them interest (28% should be enough to get the pain point across) on what they borrow and say it’ll come out of next month’s allowance – see if that teaches your kid(s) a lesson on the responsibility of borrowing.

 

#3 Your Child is Unmotivated Because He Thinks He’ll Inherit Your Wealth

Now this is one sign that would have me furious if I ever encountered it – having a child who is lazy about financial matters (or lazy and unmotivated in general) because he/she thinks that once you’re gone, all of your assets will go to him/her.

Let’s be honest – you’ve probably worked damn hard for the wealth you’ve accumulated through your business ventures or good investing. Maybe you’re living a wealthy lifestyle that you’ve surely earned.

But again, giving your child whatever he/she wants is not a good way to instil good financial habits. The only thing you’re teaching your child is that he/she will always be well taken care of financially. Unfortunately, this gives some children the impression that he/she doesn’t need to work hard for anything – because you’ll always be there (or your money will when you’re gone).

The only way to change this attitude is lead from the front – tone down the lavish lifestyle somewhat (seriously, sipping Cristal while speaking to your child about good financial habits is a bit like telling your kid to eat more vegetables while eating a steak), talk to your child about good financial habits and tell your child not to assume that he/she will inherit all of your wealth.

If you’ve taught your child well, he/she will be able to earn his/her own financial success without too much help. And if you do happen to leave your inheritance to your child when you shuffle off this mortal coil – make sure your child reads our article 3 Huge Money Mistakes You Should Avoid When Receiving an Inheritance.

 

What are some ways to ensure your children don’t follow bad financial habits? Share your thoughts with us on Facebook! For even more useful information on everything personal finance, visit MoneySmart today!

 

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Jeff Cuellar

I'm known by many titles: copywriter, published author, literary connoisseur, ex- U.S. Army intelligence analyst, and Champion of Capua.