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How to Instill a Sense of Financial Responsibility in Your Children
by A. B. Jacobs

One question I hear often is "How far should parents go in helping their financially irresponsible grown children, especially when these offspring have children of their own to support?" The problem posed does not lend itself to resolution. Although the predicament may appear to deal with money-or the lack of it-it's not inherently a financial dilemma. It actually goes far deeper and is the result of a lifetime of behavior that failed to be addressed a quarter century earlier. More to the point, attempting to instill principles or inculcate habits in children by their third or fourth decade on this earth will prove to be a futile exercise. It's my belief that a person's attitudes and values are pretty well established by the end of puberty. With that said, let me provide a few guidelines that may help you guide your offspring in more suitable directions.

1. Instruct by Precept and Example. Whether you believe it or not, your children really pay attention what you say and do. As the first authority that normally appears, a parent becomes a model on which the child fixates. Even before verbal communication is established, parental activities provide guidelines that offspring tend instinctively to emulate. Through repetition, later supplemented with oral reinforcement, a bond of behavior develops that can become an ingrained pattern. It's important to realize, however, that this input must be consistent if the lessons are to be learned. Thus, if the messages are contradictory, they will be received as mixed signals by kids. If, for example, parents proclaim the importance of living within their financial means while simultaneously indebting themselves through purchases they cannot afford, it will not go undetected by the children nor induce them to pursue habits of thrift. The only way that sound financial values can be transmitted from one generation to the next is by a systematic and continuous program that reinforces these values. Only through precept and example will sound habits be engrained.

2. Don't Encourage Unattainable Goals. Although I regard myself as an optimist, I nonetheless subscribe to the message mounted in a twelve-by-fifteen-inch frame on my wall. It is one of the many versions of Murphy's Law, which reads: "Nothing is as easy as it looks. Everything takes longer than you expect. And if anything can go wrong-it will, at the worst possible moment." Admittedly overstated for humor and effect, Murphy's Law contains an element of truth. It reminds us that life is unpredictable and if not taken into consideration can bring devastating results. Often parental aspirations fail to keep things in perspective. Well-meaning parents, who urge their children to aim for the stars while ignoring reality, do them no service. One typical example is the encouragement given to attend a prestigious university when family funds are insufficient. Over the past several years I've fielded many a letter from these children, themselves well into parenthood and overburdened with tens of thousands of dollars in unpaid student loans. In most cases, the grandiose plans envisioned never came to pass. Whatever added luster a high-priced school is designed to impart generally proves to be illusion. Instead, two years at a community college followed by two more at a local state university, in keeping with my blueprint of college on the cheap, proves far more appropriate. The point I want to stress is that realistic and attainable goals, taking into consideration the inherent abilities and limitations of each offspring, must be the basis on which guidance is given. Despite the prevalent attitude in modern society that everyone is endowed to achieve at any level, the wise parent will recognize reality and seek to counsel the child accordingly.

3. Don't Fight Against Human Nature. We individuals are programmed to behave in certain ways. Just as night inexorably follows day, we may expect certain human actions to trigger other actions. As one example, it is now established, perhaps not unexpectedly, that if a high school student is rewarded for report card grades, with $100 for each "A" and $50 for each "B," that the student's grades will rise. The anticipated reward triggers self-interest, with a desire to collect the money as the primary motive. From the student's perspective, any learning acquired that may in the long run prove beneficial is probably unimportant. What counts is cash in hand. Over the years I've witnessed a lot of strange behavior that ignored human nature. One of the more bizarre instances concerned an indolent young woman, who over many years repeatedly received instruction from her wealthy father on how to balance her checkbook. She habitually issued checks whenever she chose. If the account balance fell below zero, the bank phoned her father who deposited more money in the account. Somehow her father never understood that his instruction sessions ignored human nature; the checkbook balance held no meaning for her. So what is the purpose of this lesson? It's to stress the importance of parents' awareness of what is important to their offspring. Human nature dictates that all actions actually have real meaning.

About the Author:
AL JACOBS has been a professional investor for nearly four decades. His business experience ranges from real estate, mortgage, and securities investment to appraisal, civil engineering, and the operation of a private trust company. In addition to managing his investments on a day-to-day basis, he is a featured financial columnist for both online and print publications. He is the author of Nobody's Fool: A Skeptic's Guide to Prosperity. You may subscribe to his financial Newsletter, "On the Money Trail," at no cost or obligation, by visiting www.onthemoneytrail.com.

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