One of the dilemmas of being a parent is deciding how much financial assistance to give your children. It is every parent’s desire to be able to provide whatever their children need to live a full and happy life, but how much do you give them? Can you give your children too much and what is the best way to help them?
Very often, giving money or gifts is associated with giving love and the first point to make is that the amount of love you give your children has very little to do with the amount of money or gifts you give them. Money buys neither love nor happiness. Parents who do not put limits on what they give to their children often do so for a psychological reason that has more to do with themselves than their children.
Perhaps they feel guilty about not spending enough time with their children, or perhaps they want their children to have a better life than they had themselves. Single parents can find themselves giving too much to their children to help remove their guilt over their failed relationship.
It is the duty of every parent to raise their children in such a way that they are able to lead independent and successful lives, no matter how you might define success. An important part of parenting is instilling the values and beliefs in your children that will enable them to achieve what they want in life. There is an old adage ‘give a man fish and you feed him for a day; teach him how to fish and you feed him for a lifetime’.
Giving too much to a child creates dependency and most importantly, it allows your child to develop a lack of respect for money that can lead to financial problems later in life. Lack of respect for money usually goes hand in hand with wastefulness, an inability to save for longer term goals and sometimes a life burdened with debt.
While most parents are prepared to make huge sacrifices for their children, this can be taken to extreme and some parents incur huge debts or forego their own longer term goals in order to give their children a good life. This is undesirable for both parents and children. Parents who lack financial stability may find that their ability to help their children becomes more limited over time and they are less able to help their children with really important things later in life such as buying a house or setting up a business.
Spending too much on your children is not desirable, but saving on behalf of your children also needs to be done with careful consideration. It is common for parents to want to set up an education fund for their children to cover the costs of going to university. If your child has access to an interest free student loan then it is best to make use of borrowed funds rather than use invested funds on which you are earning a return.
The best ways of helping your children save for the future are to enrol them in KiwiSaver, which will entitle them to tax credits and employer contributions once they turn 18, and to help them save a deposit for their first house.
So before you give money or gifts to your children, think about what values you are teaching them, your own financial stability and how you can best help your children achieve their longer term goals.