Among life’s important little lessons to pass along to our children is how to handle money. Shrinking stock market returns are echoing through family structures, and where there was once abundance, now there is less; and older children who have come to depend upon their parents for financial support have, in some cases, tapped out the till.

Parents who were once able to make cash gifts to adult children are finding themselves thinking twice about handing out this largess, as they wonder about their own financial futures.

Many are finding themselves sandwiched between taking care of older parents who did not plan on living this long, and continuing to support a younger generation who grew up thinking a TV in every room, a credit card in every pocket, and a nifty new sports mobile was a right, and not a privilege.

Thomas Stanly, PhD, author of a seminal study of family wealth, The Millionaire Next Door, referred to parental support for adult children as Economic Outpatient Care.

Stanley noted that many of the older generation who provide Economic Outpatient Care showed uncommon skill at accumulating wealth earlier in their lives. Yet these same parents feel compelled, even obligated, to continue to provide support for adult children.

The net result is that the children, or those who receive such outpatient care, accumulate less on their own. They use the gifts to present a facade of a lifestyle. Worse, they become adept at manipulating their parents for more, rather than taking on responsibility for their financial situation.

Parents of younger children still have a chance to guide offspring along the road to financial responsibility.

There is a nifty piece of software on the Web for teaching younger children about money. Family Bank at www.ParentWare.org is a computer-based allowance manager that helps children learn money skills and management. According to the author it comes with a set of rules that, when agreed to by the parent and child, and adhered to by the parent, will help the child develop the habit of sound financial management.

According to Nellie Mae (college loan administrator) over 78% of college students are carrying loads of high-interest, unsecured, credit card debt. Not surprising, since credit cards solicitations are everywhere on today’s college campuses…“no income, no employment, no problem!”

Parents can do their kids a favor by teaching them a few simple rules about credit cards. First, explain to them the facts of life regarding their credit history. Without good credit, buying cars and renting apartments become more expensive at best…impossible at worst. Second, put training wheels on a credit card; start them with a prepaid or debit card that is simple to monitor. You can see if they are using it wisely while controlling the amount they spend.
Third, explain the cost of credit. Show them the math. They are smart enough to figure out what 18% interest means if added to the cost of a purchase. Explain late fees…even when only $10 might be owed. It still has to be paid on time!

Finally, monitor their purchases and teach them what is appropriate and necessary versus what is “nice to have” or an impulse.

Teaching children about money, in many respects, can be as valuable as any other aspect of their education!