Reducing Your Household Deficit

Imagine your teenager asks you for some new clothes. Next, imagine that you give your credit card to your teen, with the following instructions, “Go to the mall and get yourself some new clothes with my credit card. Just don’t get more than you’re willing to pay me back later.” How do you think that would play out?

They’d probably go to the mall, more excited than they’d ever been before, but with a little bit of caution, since they will need to pay you back. They enter the first store and find a few items they’d probably buy if you were shopping with them, but then they spot the stuff they can’t live without, the outfit three times the price you’d be willing to pay!

They try it on, love it, and get it. $160.00! There, that wasn’t hard—and, it was fun! Off to the next store, where another fantastic outfit is waiting, and this one requires new shoes to go with it. $235.00! A bit pricey, but no problem, they’ll be paying you back anyhow. Next store, they find a sale. Great! They can get three shirts for the low, low price of $65. See, they’re shopping wisely!

Time for lunch. Throw it on the card. Pay for it later!

Let’s Get Serious

Now, time to get serious. Although they have a few outfits, they’ll need a few more to for variety. A couple pairs of jeans, a few more shirts, and another pair of shoes, some socks, underwear, and a new backpack! Got all that for $250.00, now they’re bargain shopping!

Before they leave the mall, they grab a couple of CDs, and a new ipod, just for the heck of it. After all, they are paying you back for all this, so you really shouldn’t mind what they get, right? After dropping that $220.00, the $50 spent on a jacket seems like pennies. This brings their grand total to one thousand dollars!

How on earth would they pay you back a thousand dollars? Even at $8 an hour, that would take 125 hours. That’s almost a month of full-time work, and you most certainly won’t get full-time work out of your teenager, would you?

This is, of course, why credit card companies will not issue credit cards to teenagers. It’s hard enough for creditors to get adults to pay back what they charge; they certainly aren’t going to extend credit to teenagers.

Credit card companies don’t do it and neither should you, but I’m not just talking about financial credit. I’m also talking about behavioral credit.

Parents are famous for extending behavioral credit to teenagers—giving a kid what he wants first, then expecting the kid to do something to earn that thing. Good luck getting your payment!

A kid comes to mom in a panic, begging she take him to the store to get cupcakes he can take to school the next day. Mom agrees, but only if he agrees to clean his room the next day. The kid will always agree, but very rarely pays off his debt, leaving parents angry and resentful.

The Cost of Cupcakes

The clear remedy for this behavioral deficit problem is to have the kid make his payment first. When he approaches you to run out for the cupcakes, tell him you will be happy to as soon as his room is clean. He will run into his room and shove everything under his bed, then expect you to take him to the store. Go ahead and inspect the room, and when you find everything under the bed, explain you can’t take him for the cupcakes until the dirty laundry is in the hamper, the clean laundry is folded and put away and all the papers and books are neatly on the bookshelf.

At this point, he clearly understands the cost of the cupcakes. He will either clean his room or decide he doesn’t need the cupcakes. Both of those work for you. Either his room gets clean or you don’t have to go out for the cupcakes, and he learns the value of work!

If a very big event is coming up—a band trip, getting the drivers license, homecoming dance, or going on vacation with a friends’ or family, determine the behavioral cost of these events in advance and collect your payment first. If your teen falls short of the agreed-upon expectations, you really need to not let them go to the event, no matter how heart-breaking this will be for both of you. If you let them go, even though they haven’t done their part, it is the same as extending them credit. You are very unlikely to receive payment at a later time and you will only have given them practice in getting what they want without working for it.

Do yourself and your kids a favor, don’t extend them credit!

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