Parents, Back Away From the Piggy Bank!

Tapping into kids' funds in hard times a bad idea

Who stole the cookie from the cookie jar?

It may be mom or dad, according to a study released by ING Direct Monday. The financial institution found that in these tough economic times 18% of parents who have been setting cash aside for their children have tapped into that money to pay off bills and debt. And 34% of parents who have been stashing money away for their kids have reduced contributions to their children’s savings.

“It almost violates a trust that this money was set aside for your child’s future and now you’re taking it,” says Chris Long, president and financial adviser at Long and Associates.

Barring any issue beyond your control — e.g., medical bills, unemployment, or imminent foreclosure — there’s no reason to dip into your child’s savings, Long adds.

Even more startling, the report reveals that 39% of parents surveyed are more prepared to talk to their children about drugs and alcohol than money, and 27% are more prepared to talk to them about sex. Wowzers!

While all are important conversations, not teaching your kids about money can set them on the path to financial ruin before they get started. “Parents need to set an example by setting up an automatic savings plan,” said Arkadi Kuhlmann, president of ING Direct USA. “A ‘set it and forget it’ savings mentality makes it easy for parents to save, while teaching their children about the importance of putting some money aside for future needs.”

Before you resort to pilfering from your little ones or avoiding the money talk, take a look at a few tips on how you can stretch dollars while also teaching the young ones its value.

Tips for Parents
Keep track of your spending.
One way to save money is to first get a sense of where it’s going. Long recommends using MINT, a free online program that automatically tracks your spending. All you do is link your accounts to the program and categorize your spending. Unlike other online programs, MINT tracks your spending automatically.

Dip into your own funds first. Before reaching into your children’s pockets make sure you’ve exhausted your all your resources. Worse case scenario, Long suggests tapping into your 401k before tapping into your child’s 529 Plan, since you’ll end up paying tax and a 10% penalty. He shares this advice with parents: “Don’t save for your kids’ education until you are saving for emergencies and retirement.”

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