Preet Banerjee is a new Globe Investor columnist on all things personal finance-related. He is the author of WhereDoesAllMyMoneyGo.com, ranked the #1 Canadian Investing Blog by readers of the Globe and Mail. He is also the W Network Money Expert.
If your university-bound child is living in residence, you aren't the only parent wondering what kind of extra-curricular shenanigans they're going to get into. They'll be exposed to a new social environment with markedly less supervision. You're somewhat confident that you've given them the decision-making skills to act like adults when faced with temptations around drinking, drugs and sex. But have you taught them the same skills about personal finance?
Handling money poorly as a teenager doesn't lead to short-term catastrophes like bankruptcy because teenagers are normally dealing with small sums of money at any one time. They can't really get into too much trouble, and the Bank of Mom and Dad can always step in and bail them out in a real pinch.
There are hazards of living away from home. One bad decision can lead to an unwanted pregnancy. Drinking too much could lead to poor grades, and too much experimenting with drugs has its obvious pitfalls as well. But what about blowing through an allowance early or not accumulating any savings? Are we able to identify these danger signs and address them before unleashing students into a world where their peers may be partying on their parents' dime, and credit-card application booths line the hallways? Or do we see consider these signs to be innocuous?
I sometimes ask my friends about their money stresses, and more often than not, they tell me that everything seemed simpler when they had less of it. During school or shortly thereafter, they tell me that they didn't have very much in the way of assets and incomes, but their money problems weren't that big.
Within perhaps five years of graduating from school and heading into the workforce, our incomes rise, we get married, buy our first houses and start having babies. In a very short period of time, we move from simple and small personal financial decisions to larger and more complex ones.
The bad habits we get away with when we are younger, unfortunately, can turn into catastrophic money problems later in life. The Bank of Mom and Dad may not be able to bail us out at this point.
So when your kids come home for the holidays, make sure that when you are talking to them about their extra-curricular activities, you remember to ask them about their financial shenanigans too.