As a high income earner you are in the fortunate position to meet every need of your children. It is nice to spoil them sometimes without going overboard. The danger is that you make them financial dependent on you and take away their self- reliance.
If your children are working hard in university to become a lawyer, dentist, doctor, or obtaining any other marketable degree, such as engineering or business, they deserve all the financial support you can muster. For example, most doctors and dentists start their careers with a large student debt. It often becomes the millstone around their necks, limiting them in setting up their own practice, purchasing a nice home, or building up savings for a rainy day.
When it comes to post- secondary education, you need to manage their expectations. Tell them how much you are willing to pay for tuition and room and board. You also expect them to apply for scholarships and bursaries. Going to an Ivy league School in the U.S. with a price tag of $100,000 U.S. for tuition alone is not in the budget.
Support their education, not their lifestyle. Your 16 year old son or daughter does not need a new car, especially when it is financed with a bank loan. Why would you put a lot of money into a depreciable asset? If you drive the car long enough, it will have zero value.
It is important to teach your kids that money does not grow on trees. Not teaching them when they are young will limit their financial well- being as adults. A Quicken survey in the U.S. shows that making an annual income of $75,000 was challenging for adults who did not grow up learning about finances.
The key is to teach your children to work hard and save their money. This is the only road to financial security. If you pay your children $50 for garden work, pay them one-half and keep the remaining $25 locked up in the bank. How rich can you become as an adult, if you save 50% of what you make. Explain to them the miracle of compounding interest.
Give the kids a fixed budget for the necessities of life, such as food and clothing. It will curtail any discussions about buying expensive designer clothes.
Have the kids involved in discussions about family finances and how it affects decisions about family holidays, buying a family car, or eating out. It teaches the kids that they have to make some tough decisions of what they need and want.
