Should we manage our daughter's money?
You can't protect your kids from making financial mistakes, but you can provide them with the tools to learn fiscal responsibility on their own.
Question: My 20-year-old daughter works two jobs and is going back to school part-time. Her father takes her paychecks and doles out money to her as needed. He thinks he’s helping her by doing this, but I think he’s hurting her. I worry that if she doesn't start to manage her own money, she will have trouble in the future knowing how to pay bills, etc. What is your opinion? –Debbie, Canton, Ohio
Answer: First, let’s give Dad some credit for taking an active interest in his daughter’s finances. Many parents neglect this aspect of their children’s lives while they’re growing up, often to the kids’ eventual detriment. Your daughter, by contrast, has a father who is willing to take the time and effort to do what I’m sure he believes is in her best interest.
That said, I don’t think the situation you’ve described is a case of father knows best. However good Dad’s intentions are – and however much his gatekeeper-to-the-dough role might help your daughter in the short-term by preventing her from going through her money too quickly – I don’t think his approach will help her develop the financial skills she’ll need as adult to live within her means while doing things like buying a car, purchasing a home and saving for retirement.
Fact is, at some point people have to learn by doing. I’m sure Dad wants to protect your daughter from mistakes like failing to budget, running up debt, making poor investments, etc. But making mistakes, recognizing them and then changing your behavior is an important part of learning. Dad’s approach may prevent your daughter from making bad decisions with her money for now. But by coddling her this way he’s also depriving her of the very experiences that will eventually help her make reasonable decisions on her own. And isn’t that goal – for her to be able to function financially on her own?
So what do I recommend you do?
Well, maybe there’s a way to harness Dad’s willingness to help, but channel it in a more productive direction. You might suggest that over the next couple of months your husband help your daughter lay the groundwork for managing her own affairs. He could start by helping her open a checking account, savings account and sign up for any retirement and health insurance plans at work. From there he could move on to helping her create a budget and set up a system for paying bills.
As he’s doing this, he can explain the importance of each of these activities, point out some of the potential pitfalls and give her practical tips (like learning to live on your salary after you’ve made an allowance for regular saving rather than think of saving as something you do if you happen to have money left over at the end of the month).
And just so he isn’t the sole front of information – let’s face it, even well-meaning father’s don’t know everything – your husband might point your daughter to some other sources. Our Money 101 Lessons, for example, provide a quick and easy way to get up to speed on topics ranging from setting priorities and budgeting to investing and planning for retirement. (And while he’s at it, Dad might want to check out the lesson on Kids and Money .)
Your husband might also suggest your daughter check out sites more specifically geared toward students, young adults and people just starting out, such as Young Money and Kobliner.com, which is run by my former Money colleague Beth Kobliner, author of "Get A Financial Life."
And since your daughter is returning to school part-time, why not have her look into taking a course on personal finances or economics, for that matter?
This doesn’t mean your husband has to abandon his daughter financially. He can make it clear that she can come to him with questions or to discuss specific financial issues. But rather than tell her what to do or what choice to make, he should act more as a good listener who helps her evaluate options and come to her own decisions, even if he doesn’t agree with them.
In short, your husband’s aim should be to help her learn enough about her finances so she’ll eventually be able to manage them without his help, which, after all, at some point she will have to do.
IT ALL DEPENDS (Doesn't it)
There are some adult children, perhaps previous drug users, people with developmental disorders (I am not blaming you!), etc. who must have monetary oversight. And some people are simply over-protected and managed by their parents.
Walter is utterly correct when he says that: "The goal is to allow people to learn to manage their own money."
This is not taught in schools, so SOMEONE has to teach it. As a parent, that person is YOU:
1. I sat down with my 16 y/o daughter years ago and created an "imaginary" home budget. She was blown away! It was a terrible shock to her. She still remembers the episode. We looked through rental apartment ads, insurance rates, car payments, food, etc. I used the income of a full-time retail employee as an example.
2. Give your children an amount of money to learn to practice on. That's what the "olde" allowance was for. You can also do this with adult children.
3. Allowances and money to adults must have at least two things that accompany them:
1. An amount limit
2. A time limit
3. An (optional) payback program
When we sent our daughter off to college, it was required that she keep a 2.0 grade average in order to be continued to be funded. We thought that was fair. (She did FAR better, as it turned out)
4. The best way to teach financial management is to allow your children some "exposure" to family finances. This doesn't mean telling them how much money you earn. But if the family is having financial troubles, you NEED to inform your kids about it immediately and allow them to find ways to "contribute" to family finances…perhaps through part-time jobs, couponing, skin-flint living, etc.
Don't make finances a "shielded" issue from your family. Include them in on how you think and act on financial living.
They won't get it from anyone else.
sanjosemike
No way should Dad be handling her money. If she owes him rent then it's her job to budget for that. If she doesn't, she can sleep in her car. She'll learn how to budget her money then. No way would I have put up with my dad handling my money at 20. I've handled my own money myself since I started babysitting for money at 11 or so.
My brother is bipolar and has no real concept of money or value. In the past he blew through more than five thousand dollars in his college fund and ended the semester owing for both housing and tuition. He could not explain where the money went.
Without my mother constantly supervising and taking responsibility for every check and bill, the money would simply run through his fingers.
It sounds a little like this girl has a bad history with money, and Dad is trying to get her on the right track.
I'm glad to see that I'm not the only one who found this story creepy…My father had a similar financial stratagy with my brother and I. When we were both in our early 20's we found out that he had spent every penny that came from our jobs and an inheiritance that was split between we children.
Perhaps mom needs to have a look at where all of her daughter's money is….
As someone pointed out earlier, the printed question is missing a lot of relevant background information.
Reading between the lines, it seems like the daughter had racked up four or five digits worth of plastic debts, or worse. There is a lot of 20 year olds living with parents, and there are lots of 20 year olds living on their own and working two jobs to support themselves through life and maybe pay for college. I don't think too much 20-yr olds would live with their parents AND work two jobs + school.
I can still remember one of my ex-girlfriends telling me how glad she was that her mom gave her $120 to cover three or four overdraft charges my ex had stacked up in one day. That and the fact that she checked her CC balances almost daily due to debts from a few decisions in the past. The punchline? She worked for Bank of America.
I always suspected she was mildly bipolar, but I never found out for sure. Unfortunately, the 20yr-old in this article most likely has some developmental or emotional problems as well. Managing money prudently is never easy for people for people with impaired judgment or impulse control, not is it their fault. It's pretty messed up for the dad to take control of his daughter's finances in such a way, but part of being a good parent is doing what's right and not what's most expedient.
My Mother did this for me when I was in my late teens/early twenties. The small amount of money she doled out to me out of my paycheck far more about frugality then if I had the whole paycheck to spend as I wished. The money she saved for me ended up paying for my wedding and with enough left over for a down payment on my house. I am now a CPA with a six figure income and am immensely grateful to my mother for this active interest in my financial well being.
Rob, I'm not sure what point you're trying to prove when you say "Back to school at 20?!?" but typical college students are 20 years old when they go into either their Junior or Senior year.
At first I thought some of the readers who said "look into what Dad's been doing with the money" were being a bit cynical, but the more I think about it, the more I feel it is a possibility. Could he be taking "room and board" from her without her knowledge? I would definitely look into that.
Now, if my first sense was correct (which I hope it was), my guess is that he's probably trying to be helpful by assisting her with the mundane tasks of finances while his daughter tries to work some part time jobs and continue working on a post-secondary education. This is very nice, but as Walter said, not something that is going to benefit her in the long run.
If this is the case, one of the best ways to minimize some of the "mundane" tasks of personal finance management is to utilize personal finance software like Quicken or Microsoft Money. These are very nice and easy software programs which link to just about any financial institution out there (banks, credit card companies, etc.). From there, Dad can show her how to set her budget, track her spending, categorize, etc. The software can assist with a majority of the "mundane" tasks while allowing her to work on the more "value-add" analysis of seeing exactly what she's doing with her money.
Who knows, maybe Dad might find some benefit to such software for his own finances as well?
This is becoming very common these days. We are babying our children so much to the point they are not going to have the slightest clue how to survive on their own when it's time. It's great that Dad wants to help; good advice is help. Eventually the girl is going to be slapped in the face with reality and it is going to knock her off her feet. I am 24 years old and manage my money well. My father stopped helping me when I was 17. I hated him for it at the time but am grateful today. Children need preparation for the real world. The real world that is mean and will chew tham up and spit them out. Children need to learn how to lose. All this equaslity BS and credit for effort is nonsense and is really going to hold back our children from being able to survive on there own. Let go Dad.
One of my friends is 22 and his parents manage his finances in the same way – over the years, he has learned that his parents will take care of all the required stuff, so that whatever money he touches can be spent frivolously with no consequences. I am very nervous about what will happen when he is finally managing his own finances.
I wonder if there aren't some dysfunctional family issues going on here that are only marginally related to money. It feels too much (and not in a nice way) that Dad needs to be in control. Perhaps she's working two jobs so she can afford to move out and he doesn't want her to. If you follow that line of reasoning it gets pretty creepy pretty fast.
When I was young, I had a decent-sized savings account, and through bad decisions I completely drained it and ran up a ton of credit card debt. Ten years later, I've paid off those cards and have absolutely no debt at all, plus I've rebuilt my savings. Protecting someone from making mistakes is admirable, BUT sometimes you have to make mistakes to really learn the lessons.
If the daughter is still Living at home under his roof, I think the dad has every right to control some of the money..ie it being rent, grocery, or cell phone? He just might be teaching her responsibility by paying for her own room. Until she is out of the house, dads rule.
I think the best thing that my daughter and I did together was read "The Richest Man in Babylon" by George S. Clason. Obviously not a be-all book, it made very good sense to a 12 year old little girl. And it was easy reading. We read it two or three times per year until she was 16. The practical points stuck in her head. Arm them with knowledge but let them fail. That is where the real lessons stick.
Her father is trying the best way he knows how to help his daughter. Good for him, however he should direct her to educational sites so she can learn and manage her own finances. I have worked in the financial industry for 32 years and did the same for my daughter/son and then let them handle themselves. I also work with people who make 6 figure incomes who don't know how to manage their finances-I believe a course in Personal Money Mgmt should be required to graduate from high school!
I was engaged to a girl and told her to get lost because she never managed her money and did not know how to. There is a point at which you have to take responsibility and be an adult.
Question: My 20-year-old daughter works two jobs and is going back to school part-time. Her father takes her paychecks and doles out money to her as needed. He thinks he’s helping her by doing this, but I think he’s hurting her. I worry that if she doesn’t start to manage her own money, she will have trouble in the future knowing how to pay bills, etc. What is your opinion? –Debbie, Canton, Ohio
The comments preceding my entry made very good analysis of the information, considering how meager the amount of useful information was given.
30 years ago I was working two part-time jobs and going to school part-time – and found it impossible to get enough sleep, and had to give up on of the jobs. There was travel time between the jobs and school and home and that, of course, contributed no money and no study or homework time, nor time to manage my finances. As I had no debt, I only had to worry about current bills and future college costs.
If the father is acting as an accountant and a bookkeeper with his daughter's money, then he is giving her TIME to focus on her studies, TIME to learn various work skills at the two jobs, and possibly TIME to develop a network of people she can work with in future jobs.
Yes, sometime the daughter will have to do the bookkeeping herself, make financial decisions herself. She can review the records he keeps when the school is between semesters or on break, and make decisions for her future, including decisions that include her father handling her money.
One final note. By having her father handle her money, and giving her an "allowance" from that money, she can tell her friends and acquaintances she doesn't have enough money to do this certain thing, to participate in that certain activity – she implies the money in her pocket is all she has. It's a way to keep the impulse spenders from trying to influence her spending.
My youngest, also age 20, is still anxious about money, so at her request, I'm on her checking and savings account, and although I'm not on her CC, she has given me access to her online account.
I mostly stay out of it, but when I see things getting a little scary, we have a what's-up? conversation. She actually wants the feedback, and I am seeing progress in her attitudes and in her self-control.
Working two jobs and going to school? That doesn't leave daughter much time to manage money. But managing money is an essential skill, especially for people who have to work two jobs to pay their bills. Dad might help and teach financial skills by helping daughter work out a budget, then preparing bill payments and leaving them for daughter to sign checks and record payments. That would help daughter become aware of expenses and provide a regular opportunity to discuss budget. Since she's handing over pay to Dad, she probably has no idea of her regular expenses. Start slow, then build up.
I am also a 20 year old college student working at an internship to pay for my school. My dad helps me handle my finances, primarily because the bills are sent to their house (rather than re-doing the info every semester when I move) and it makes things much easier that way. All through my life, my parents have made saving a priority and made sure us kids were all aware of it also. Right now, my parents pretty well follow the advice given in the article, explaining things like automatic deductions and savings accounts is great for young adults. Even though I am yet to actually write out a check and pay a bill (my dad pays it from a joint account and goes over the information when I come home), I feel I have better money management skills than many of the adults I work with.
My mother took my money too… except she took it from me because she had a gambling addiction. That was horrible.
Sure, this dad is keeping his daughter from learning a lesson. Whenever parents do things that their kids should be doing themselves, they are hurting more than helping. This young lady may enter the real world and be helpless!
Still, I suppose it's better than what happened to me!
From the looks of things, Dad is hurting his daughter, not helping her. Managing your daughter's financial life means she'll never learn to manage her own.
This letter raises a lot of questions. Why is the daughter signing her paychecks over to Dad? Is Dad paying off a mountain of credit card or medical debt for daughter? Is daugther paying back bail or fines?
What is Dad doing with whatever is left over? Is it going into a savings account? Is it going into Dad's pocket? Does Dad tell Daughter what he's doing with the money (with statements to bak it up), or does she "trust him" ?
Yeah, I fell for this when I was a working teen and my parent INSISTED on "holding" my paychecks "so I wouldnt spend it all" Turns out THEY were the ones who spent it!! (They also opened a few credit cards in my name and had me take out a car loan then refused to ever let me drive the car). Fortunately the law was on my side with the credit cards (I cancelled them so they couldnt be used) and the car was titled and registered in my name so when I moved out and drove off with it, they didnt have a leg to stand on.
The daughter might want to do a quick audit and cut off the deposits to "Bank of Dad" until she gets a good accounting.
What 20-year-old turns over her paychecks without a fight? Parents aren't doing their kids any favors by keeping them dependent and ignorant this long.
Have to agree with Rob in Houston that a father interfering to this degree in the life of a 20 year old bespeaks issues about the father. No matter what is going on with the daughter – whether she's run up debt or is not conscientious about her money, Daddy in control is not going to accomplish anything. A 20 year old is an adult and should be treated as such, including making mistakes and learning by them. No matter what happens, the consequence should rest squarely on the 20 year old. As of now Daddy is crippling her.
You can’t protect your kids from making financial mistakes, but you can provide them with the tools to learn fiscal responsibility on their own. I wish the Government would learn this lesson. Apparently they aren't going to rescue your children or mine, but Wall Street will survive.
Dad needs to stop it right now. My Ex-mother-in-law did this to her son when he first started working. His parents also tended to pay for things he should of been taking care of, like the down-payment on his house and a new roof. As result, he never learned to manage money and that is one of the reasons he is now an ex-husband.
I'd hear about the parent helping her out this way than hear about him giving her money any time she asks for it. At least she is working… too many older kids still depend on daddy and mommy for money. I work at a bank and get requests to transfer money to my "children's" acct on a daily basis… children being that 25 + yr old taking $$ for eating out, partying…
Maybe it's just me, but I find this sort of creepy. This daughter is a legal adult – a grown woman working two jobs. Why is her father "taking" her paychecks??? And why is she permitting it? I suspect the money issue is only one symptom of deeper problems here. Either her father is dangerously over-controlling, or her parents have never permitted her to begin to grow up. Either possibility is unhealthy for everyone involved, and they may need family therapy more than they need financial advice.
Wow this hits close to home. Not for me but my younger brother. First a bit of background: Dad is a CPA and I took after him but my career is in Finance. My brother doesn't take after either of us.
I love him but he has no concept of how to handle his $$$. He is 30ish, lives at home, and has an "allowance" since he can not under any circumstances help himself out.
As you can read, I am familiar with this situation. I applaud dad but at some point in time he needs to ween the daughter off of his assistance. He needs to let her know he will be there to help her out if she needs it but there comes a time she is on her own.
I have a five year old and she gets an allowance and stuffs it into her piggy bank. When she gets large ($20) sums of money from the family we go straight to the bank.
If she wants to buy things that she doesn't need (like a new coloring book or Barbie) she uses her own money. Do I feel guilty making her use her own money sometimes, sure, but my hope is that one day she will realize the value of her money and not be living with me when she is 30ish.
My father's best money-management education was given to me when I was 16 years old. I was working as a "carpenter's stiff" slamming nails in Newton,Mass., and making $10 a day. One night my father took me to the dog track and placed five $2 bets for me. I lost a day's wages in a couple hours and only had the hot July sun and eight hours work to look forward to. Money lesson like that one you don't forget.
I have the opposite problem. My husband & 20-yr old son wants me to manage the son's money. I agree to advise him when requested but feel he needs to learn NOW from any mistakes made – instead of later on down the road when the stakes are higher.
The father is actually helping in this situation more than the author thinks. By being the door through which the money flows, the daughter is forced to constantly think about what she is going to spend her money on since blowing it on something stupid will elicit a reaction from dad. In other words, the negative consequence she receives by choosing to spend on something stupid comes from the reaction from her dad instead of an empty bank account.
While I can't say I would do things this way, it certaily does help teach the daughter good financial skills by making her justify all her purchases.
My parents never did this. I would see what's going on with the money, and make sure she's receiving all of it back. It's not helping her… it's hurting her. I make more than the average college student and some people who have "real" jobs, but I know how to manage my money because I always have.. even when I wasn't making more than 10-12k a year… what's the cut off point? When does he stop controlling her finances?
I agree with Annie from NY, 20 years old is too old to be learning about money. It's best to learn financial lessons when you are young, and there is less at stake.
Taking college courses in finance/accounting/economics teaches great theory, but it's no subsitute for experience. She is going to have a lot of catching up to do. Better late than never
I'm going to read between the lines a little and assume there is more going on that stated up front. If the Dad is managing her finances odds are she is living at home, and if she is working two jobs AND going to school odds are it's because she needs the money not because she is saving for retirement (more power to her if she actually is, it's just not likely). If I were to guess she simply made bad decisions with credit cards a while back (or something similar) and her father is managing her finances to keep help her get out/stay out of debt. And no, Annie, I don't think it would be different if it was a son (not to pick on you, there are only three comments up and even though I disagree with you, you are the only one who posted a worthwhile comment at this point).
That said, I agree with Annie that money management should have been taught at age 8 and not 20. And assuming I am right about the daughters situation and not just a hopeless optimist, the father should put put her back in charge of her money once she has bounced back (but definitely still advise her).
Ok, where is the rest of her money going? Has it been deposited into an account or into his pocket? How do we know he's not helping himself to whatever is left and that's why he's so 'helpful'. If this is the case, he's never going to want to let go of the gravy train.
And, yes, I speak from painful experience. My mother stole thousands from me over a period of a few years under the guise of being 'helpful' when I was just starting out. I thought the money was going into two accounts for me, one for long-term savings and one for short-term savings. At the end of 4 years, I had nothing. She enjoyed her cruise to Spain and her new car, though. I sure they more than make up for not having a daughter anymore.
Back to school at 20? I'm reaching the inescapable conclusion that overprotective dad's control has led to under performing daughter. I wonder if dad was present at the job interviews or filled out the employment applications. Maybe he cuts up her dinner for her as well.
My sense is that treating your 20 year old daughter like a child might actually be the root of your problem.
Yes, 20 is a bit old to begin passing on the ownership of the day-to-day details, but I'm betting she's been absorbing good lessons in this household where attention to financial matters is clearly a priority. I'm sure with this type of dedication, Dad can quickly turn his attention to teaching her how to ensure her financial independence. He doesn't have to abdicate his role in her financial life totally, just refocus it to advisor/resource person instead of 'allowance giver'.
Why shouldn't MOM help with financial advice?
at the least, she's living proof that women should learn their own financial skills…
Would dad even think of doing this with a 20 year old son ?? Does he think he's getting her ready for when her husband gives her an allowance ?? And isn't teaching money lessons at 20 a bit old ?? They should have started teaching money lessons when she began earning an allowance, say at the age of 8. I agree with the editor, be an advisor and not a controller.
Wow, I would not have put up with that when I was 20 (or 16 for that matter)!!! How does the father expect the kid (really, and legally an adult) to learn?
THAT WAS A VERY HELPFUL ADVICE. CHILDREN HAVE STARTED EARNING THOUGH BUT, DON'T PROPERLY MANAGE THEIR EARNINGS.
Dave Ramsey has some great programs for money management – I would recommend that Dad give one of these seminars to his daughter as a gift, he may even want to attend with her and then trust that she wil use the information well. He can stay close for advice but really needs to give her the tools to stand on her own.