Paying It Forward: Closing the 'Bank of Mom and Dad'

Aneth Ng-Lim

Posted at Aug 05 2019 09:46 AM

Among the Graduates of 2019, many should have found work by now, and receiving their first, second, even third paychecks. As they join the income-generating members of our society, this is a good time to close the “Bank of Mom of Dad”.

Here in the Philippines, it’s quite common to find parents supporting their children even after they turn 18. Mom and Dad are actually expected to pay for college, and provide room and board too. When their children start working, there is no rush for them to leave the nest and they linger and linger until they get married. Some even choose to stay in their parent’s home while they start a family.

Poor Mom and Dad – is there no end to their financial obligations?

Nothing wrong with keeping families close, but if you can do so and teach them financial independence, then you have no problem.

Beyond choosing (and paying) for the right schools for their children, parents have a responsibility to also give them a financial education. Do this as early as possible, as studies have shown that kids are never too young to understand personal finance, nor is anyone too old to learn. Research in many countries around the world also proved that financially independent adults are model citizens, that is they respect the laws, pay their taxes right, and do not become a burden to their communities.

As a parent, you don’t need to wait for graduation to start closing the Bank of Mom and Dad. You can start with bank holidays, or specific purchases before officially declaring your bank closed to your children. Here’s how you can plan your exit strategy.

No. 1 Explain the new normal

Children need to know that things are changing so open communication is important. Start small and grow the discussion from there.

In my case, I told my 17-year old daughter that if she wanted a new phone, she will have to pay for it. So she brokered a deal with my husband where she will work in his office during the summer to raise money. She also looked at her savings, and sold her old phone too. As she was managing all these, she became more and more worried as she realized the phone she bought (yes, my bad because I paid for it first) was expensive and paying it off will take a really long time. She also realized we were serious that this was debt, and not ours.

No. 2 Failure is the best teacher

My daughter is a worrier, and I could see the phone debt weighing on her heavily. She began to have fruit-related nightmares (that phone brand can be blamed for her troubles) and finally came to us that she regrets buying the new phone. I suspect she was about to tell us that she will sell it – but we headed her off and offered her an alternative payment plan.

It’s not easy for parents to have a front row seat to their children’s troubles, but failure is really the best teacher. This experience has taught mine several including: (1) checking prices online before making a purchase; (2) not touching her savings again for things she does not really need; (3) working is hard, harder than studying; (4) when Mom and Dad say no we really mean no; and (5) money does not grow on trees.

No. 3 Tell your children about budgets

Before the phone drama (yes it had all the elements of a top rated Korean telenovela), my daughter viewed her school allowance as a never-ending supply. So when we cut it off during the summer, she was shocked as that was one “income stream” she was counting on to help pay off her phone.

I regret not talking to her sooner about what the allowance is really for, and how to set a budget with it. Children need to know that parents are not bottomless wallets, or credit cards that are never declined. So we told her about how much we spend for her education, and how much we can give her for daily expenses. While she can only see and spend her allowance, there is a much bigger budget that we allocated for her (and actually spent)! Now it’s her turn to budget her allowance so she can pay for her meals in school, small daily purchases and build up her savings again.

No. 4 Breaking the cycle one circle at a time

You won’t be able to close the Bank of Mom and Dad overnight, but you can take active steps to break the cycle, one circle at a time. Start with the smaller circles and graduate to the bigger ones.

One of our small circles was about sharing with the less fortunate. We expose our daughters to charities and they enjoy giving back, but that’s probably because they do not write the check or underwrite the expenses around these activities.

Last summer, my 17-year old wanted to support a feeding program for street children under the care of Childhope Philippines and as she was already up to her ears in phone debt, she decided to raid her closet and sell clothes she never used and also some gently-used items to raise money.

Another small circle was buying cheap clothes online. We brought to her attention how mass-market clothes and sweat shops are realities and their cruelties to workers and the environment. Soon after, she deleted the Apps and we happily pressed the unsubscribe buttons.

No. 5 Celebrate the positives

Back to the fundraising initiative, my 17-year old naively thought it would be easy, and was disappointed to raise only P2,600 from her Instagram @closetforhope. But P2,600 will feed 25 kids one meal so we told her she was off to a great start. Even the P2,600 was fiercely won as there were hiccups with bargaining, payments and shipping along the way.

She made around 17x that amount towards her phone and that was also something worth celebrating. No she did not pay it off but as I wrote, one cycle at a time.

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If you have taken these steps, and still find yourselves tempted to help, rein it in. Parental support is one thing, and financial enabling is another. Even if you have enough money for the rest of your life and to fund theirs, that’s not healthy. Just look at why Bill Gates and many other billionaires are choosing to give most of their money to charity.

There is real satisfaction in knowing you can provide for your needs and you should not rob your children of that experience.