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Four Ways for Boomers to Help their Kids Get a Grip on their Finances

February 6, 2012

 

Young people are drowning in a sea of debt.  Credit card and student loan debt are among the biggest problems.  And, where do they go to help pay off that debt?  To their parents, of course.  So, at a time they can least afford it, many parents are sacrificing their own financial futures to bail out the kids.

How did this happen? And how can parents help the 20-somethings without dipping into their own retirement savings?

Credit card debt happened because the kids were approved for credit cards even if they didn’t have jobs.  “Buy it now, pay for it later” became their mantra.  In the banks’ heyday of the early 2000s, credit card pre-approval letters arrived in the mail daily for the college bound students.

“Look Mom, another Visa card application,” I remember my18-year-old son saying in 2001.

This Baby Boomer parent would issue curt threats, “don’t you ever, ever accept a credit card until you have a job,” drawing on my own background of being raised to pay in cash.

Luckily, my son listened to me, but many kids take the credit plunge.   They spend four or five years charging furniture, food, liquor and vacations.  In addition, many are also accumulating student loan debt.  Then graduation occurs—and if they are lucky enough to get a job, they begin their careers with a mountain of debt.

So what can parents do to help their kids pave a lean path to financial independence without using their own savings?  Here are 4 tips to help your kids dig out of debt and pave a clean path to financial independence.

  • Talk to them.  Ask them about their finances?  Ask them how much credit card debt they have?  Ask them how much student loans they have to repay.  Parents often hesitate to ask their kids about money.  They may feel guilty that they couldn’t pay for their college expenses, or that it’s really none of their business.  They may think if they ask about the kids’ financial situation, they will have to give them money.  They don’t.  The goal is to give the kids the tools to manage their own money.
  • Support them.  Not financially, but emotionally.  Assure them that you understand their predicament, even if you don’t.  Be positive.  If you are supportive, they will be open to suggestions, if not, they will be back away and dig deeper.  We can share a teachable moment with our kids, by relating to them through their favorite method—technology.
  • Stay neutral and stick to the facts.  The tendency of all parents is to teach, but resist the opportunity to say, “I told you so,” or to lecture.  These are young adults, in a vulnerable position, probably embarrassed by their out of control finances.  Don’t make it more difficult.
  • Empower them.  Give them the tools to get their financial house in order—alone.

There is excellent online personal finance software called Mint.com that you can suggest to them.  It is free, and owned by Intuit, Inc., the makers of Quicken and QuickBooks, the finance software used by many Baby Boomers.

Mint.com was launched in 2007 by a young man who wanted to organize his finances.  It now provides almost 5 million users easy ways to manage their money.

Log on to the site, Boomer parents.  You can see the features of Mint.com’s step-by-step “Get out of Debt” goal that allows users to:

  • Break down debt by creating separate goals by debt type—credit cards or loans
  • Create payment plans—the program allows users to see how changing monthly payments affects interest paid, and how money can be saved.
  • Take a comprehensive look at debt—users can create a 6 month payment plan detailing monthly payments for each debt.
  • Develop an action plan—there are steps to find the best and fastest way to pay off debt and optimize savings.

Mint.com is not just for debt reduction, it is just a good solid money management program aimed at 20 and 30 year olds.  There are also several other on-line financial management sites.

To be clear, I do not have any relationship with Mint.com other than discussing it with my 29-year-old son who said he has used it.

But after listening to my friends, colleagues and acquaintances in the gym and coffee shops agonize over their kids’ bleak and disorganized financial situations, I decided to delve into the topic.

Step up Boomer parents and have “the talk” with your kids.  You can make a difference in all of your financial futures.

 

 

 

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