Child can learn about money if parents teach

Getting Started

Your Money

March 21, 2004|By JULIE CLAIRE DIOP

MEGHNA Chakrabarti had an unusual childhood.

It wasn't just because her parents immigrated to Boston from Bombay before she was born, bringing with them, according to family lore, just $7.63, a few suitcases and the promise of research positions at Harvard Medical School.

It was also because her parents actually taught her about money.

When Chakrabarti, now 28, was a toddler, the family moved again, for jobs in Corvallis, Ore. Her parents were able to buy a house and get by on bargain-hunting. But they worried about paying college tuition for Chakrabarti and her brother, Samidh. They invested in their first business venture in the mid-1980s, an apartment complex, with a couple of partners and a large loan.

Chakrabarti remembers dinner conversations about interest rates, bank managers and new investment opportunities. Her parents' investments made money, yet their lifestyle did not change.

When Chakrabarti attended Stanford University, and her parents paid her tuition bills every eight weeks, she fully appreciated what they had accomplished. Her father insisted she get a credit card to build up her credit, and unlike some of her friends, she knew to use it responsibly, paying off her balance each month.

But Chakrabarti is not the norm. Only 27 percent of parents talk to their children about money, according to a Charles Schwab & Co. survey, and those that do are more open to talking to their sons than daughters, especially about the stock market.

Between parents and children, "there is an overwhelming amount of silence," said Nathan Dungan, author of Prodigal Sons and Material Girls: How Not to Be Your Child's ATM. This means young adults, overwhelmed by advertisements for credit cards, are often unprepared to manage their own finances.

Money is a delicate dinner table subject for many reasons, said Carrie Schwab-Pomerantz, daughter of Charles Schwab and author of How to Have the Essential Conversations with Your Family About Money and Investing. Parents often are not financially knowledgeable themselves or feel that discussions about money are "too personal."

Despite the lack of conversation, 81 percent of adults say their parents are a major influence on how they use money, said Dungan. So when a father gets the bill at a restaurant, shields it with his napkin and then hands it back to the waiter with a credit card, what kind of lesson does that teach his children? A pretty dangerous one, said Dungan. They grow up believing money will always be there when they need it.

And when money is not available, credit cards are. Ten percent of 21-year-olds have credit card debt in excess of $7,000, according to American Demographics magazine. The fastest growing age group filing for bankruptcy is under 25, said Dungan.

A major change from the last generation to this one is the importance placed on money. In 1967, 86 percent of college freshman said it was important to find a meaningful life philosophy, according to an annual UCLA study. Today, fewer than 40 percent say a meaningful life philosophy is important. Instead, 74 percent say they want to be "very well off financially."

Such changes in attitude, combined with corporate America's aggressive marketing to young people, means "we're in uncharted territory," said Dungan.

Schwab-Pomerantz encourages young people to educate themselves by talking with their parents about money, even if their parents resisted such conversations before, and by reading books and magazines on the subject.

Chakrabarti has some savings and a full-time job as a producer of an evening radio program in Boston. She has been visiting neighborhoods with friends, scouting out where she wants to buy a condominium, which will be her first large investment. Her goal, she said, is not necessarily to be wealthy, but, like her parents, to live comfortably, start a family and one day pay for her children's college tuitions.

E-mail Julie Claire Diop at yourmoneytribune.com.

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