Help Your Children Avoid The Overspending Trap
Sun Herald
Sunday March 9, 2003
IF your grown-up children struggle to meet their mortgage repayments, juggle credit-card debt and spend too much on their mobile phones, it's time to suggest they go back tobasics.
A simple money plan is the first step on the path to being debt-free, allowing your kids to sit down andpinpoint where their money isvanishing.
Often, it's not the mortgage that's the problem, Ryde Eastwood Financial Counselling Service co-ordinator Narelle Brown says. It's their choices in spending.
But, as a concerned parent, try not to use standover tactics to spur children into action, Brown cautions.
``I think parents should make their children aware of financial counsellors," Brown said. ``Suggest websites such as www.asic.gov.au, which has plenty of helpful advice on clearing debts, and give them as many tools as possible to assist them.
``If they can sit down and look at a money plan, and examine every area and question whether there is a cheaper alternative, this is a key step to getting their affairs back in order."
A financial counsellor will look at their mortgage to see if it is affordable or can be reduced, extended or refinanced. Credit-card statements can also be closely examined to find out what is pushing them over the limit.
For best results, your children should ask themselves a few searching questions. Do I really need this? What will happen if I don't have it? Will my life be significantly different?
These questions can be applied to mobile phone usage. Once again, other options need to be considered, such as one phone rather than two, or a pre-paid phone card.
A simple solution to your children's dilemma may be for them to refinance the mortgage to embrace the debt or take out a personal loan. But that in itself will not prevent a recurrence of the problem as old habits can easily surface again, especially when the debts on the cards have been wiped clean.
The best outcome is to concentrate on behavioural changes. If there is more than one card, reduce it to one or none, rethink spending patterns and examine spending triggers.
``It is when you get into crisis with debt that things can change because you have to do something about it," Brown said.
If your children are in a relationship, they may also be focused on different goals one may be intent on saving as much as possible, while the other wants to furnish the house in the latest whitegoods or blow the budget on a luxury holiday. If that's the case, they need to decide on a joint focus.
``A lot of people find that as their income grows so does their lifestyle. That inevitably leaves them with little opportunity to save to buy an asset and can easily lead to debt problems," she said. ``If that's the case with your kids, empower them by giving them the tools to take charge. Remember that it's actually disempowering if you do something for someone that they can do themselves."
Linda Gough is an executive vicepresident with BTFunds Management. This information doesn't account for your investment objectives, particular needs orfinancial situation. These should be considered before investing and we recommend you consult a financial adviser.
© 2003 Sun Herald