Dealing With Children's Money and Expenses in Stepfamilies
DEALING WITH CHILDREN'S MONEY AND EXPENSES IN STEPFAMILIES
by Margorie Engel, © 1994
Children represent the largest investment that most married couples make when you consider the time, money and day-to-day involvement they require. Couples make this investment for the main benefit they expect to reap—LOVE.
Children are an important as a source of love because they are becoming the only permanent love relationships people have in America. We're a geographically mobile society and this takes us away from parents and siblings. Because of our high divorce rate, parents are more likely to have a permanent relationship with their children than with a spouse. In one man's words, "If you want to have a lasting relationship, have children." Ask many adults in stepfamilies and you will hear, "Children fill in where my spouse leaves off."
Children are extensions of their parents and the success or failure of children and stepchildren is a sensitive point when they are viewed as investments. The cost of rearing these children/investments is much higher than it used to be. In addition to child support payments for a prior family, if the remarried couple decides to have children together, the family budget is further strained. The wide age spans likely among children from multiple marriages mean that couples will have child-related expenses over a much longer period than parents in a single marriage. "Can we afford a baby?" is a frequent question. "What do we tell children about the family's finances? is another.
Remarried couples aren't anxious to give their children family financial information when they feel it will be relayed to a former spouse. Parents in new stepfamilies also want to keep money and financial problems from creating more stress for their children. Nonetheless, money talks can assure the children of their parent's commitment to each other and to each other's children, especially when there is joint planning to minimize financial differences between his, her,and our children.
OUT-GOING CHILD SUPPORT
It's not uncommon for one spouse (usually the dad) to be financially obligated to more than one home. Children and money are the main elements of contention between ex-spouses and the main link between them. Adults who share the biological parentage of children have to learn to talk with each other about money for the children. Unwarranted miserliness or "spoiling" will damage their off-spring and, possibly, the new marriage.
Divorce Agreements address "Responsibility to Children." This responsibility falls into the following
§ Form of custody
§ Communication Between Parents
§ Communication Between Parents and Community
§ Communication Between Parents and Children
§ Resolution of Differences
§ Periodic Re-evaluation
§ Dollar payments
§ Medical Insurance
§ Children's Money
§ Testamentary Provisions
§ Change in Circumstances
§ Payment Assurance
Since a large percentage of remarried wives are also divorced mothers and on the receiving end of child support money, a typical response to child support payments is, "I could never respect my husband the way I do if he didn't live up to his financial responsibilities to his children." However, out-going child-support can also be a source of contention for the remarried couple. As one second wife phrased it, "A large chunk of his money goes into child support. It's not easy for those payments to be made every month." How nice it would be if all of the parents (husband, new wife, and ex-wife) could sit in on a family financial discussion about the children's needs and wants in relationship to the available money.
This type of "dream-on" discussion could go a long way toward alleviating the typical frustration about how child support money is actually spent for the children. Written in 1977, Brooke Hayward (daughter of actress Margaret Sullavan and producer Leland Hayward) described in Haywire: "I wish to hell [your mother would] buy you some decent clothes. Whenever you come to see me, you're all wearing the worst-looking rags. I'm sure she sends you off like that deliberately. She knows I'll have to outfit you from top to bottom before I can set foot on the street with you."
There are very few ex-spouses who do not use the children against each other in this way at least a few times. Variations of that conversation are repeated across our country every day about sneakers, coats, haircuts, and anything else the paying parent feels he should be able to assume is covered by court-ordered child support payments.
Therapists hear stories from second wives about how their husbands spoil their children by giving them toys, electronics, vacations, and even automobiles when the new family's finances cannot afford such generosity. If the couple can afford to live luxuriously, the new wife will find it easier to back up her husband's right to spend money however he likes. His spending is not likely to interfere with their life-style.
IN-COMING CHILD SUPPORT
Remarriage does not end your ex-spouse's obligations to continue child support and you can be just as vigorous in collecting child-support payments as you were when you were single. (Alimony, however, does usually stop so if you cannot stand that drop in your personal income, don't remarry.) The question in stepfamilies is, "How will child support be used?"
The recipient spouse has to be sensitive to the needs of the new household. I've heard stepfathers say, "I feel that the children are part of the new family and their income should be available for household as well as their personal expenses." Some remarried husbands find themselves resentful when more-than-adequate child support money is spent on his bride's new clothes making him feel that she's wearing something that "he bought her." On the other hand, court records show that the payer of child support funds often feels that the children aren't receiving the proper benefit of payments being made.
Carefully documenting how child support funds are spent will eliminate any suggestion that the funds are being misused. I found that many stepfamilies track child support funds separately for the children's benefit. They agree upon the children's basic personal needs, clothing, recreation, allowances, etc. "Surplus" money is considered available for meeting increased household costs such as food, electricity, laundry, and possibly an additional phone line. For instance, every household with teenagers is familiar with humongous grocery bills and perpetually-running hair dryers.
"FAIR" TREATMENT FOR ALL CHILDREN
We romanticize the family as the one place where everything is shared and where nobody measures. Because of this image, we underestimate the conflicts of interest and rivalries that are inevitable. There is probably more counting in stepfamilies than in any other close group of people. We don't have very many clear rules of stepfamily money management and yet people know when they've been wronged!
Children want us to equate fairness with equality. They look to see how much money in the form of new clothing, toys, and vacations their parent/stepparent spends on each set of children. Children will find ways to feel left out and jealous. Probably the most frequently heard phrase in stepfamilies is, "It's not fair." Younger children may say this during tantrums but it is not a missing thought among adult children. It's just not expressed so openly. You'll hear something more like, "If my father hadn't married a woman with young children, I'm sure he would have helped me pay for his grandchildren's private school. Now, I don't feel comfortable asking and I resent them."
There's an old proverb that goes, "Be careful what you ask for. You might get it." When stepparents have enough money to "buy" their children's/stepchildren's good will, the children may feel that the more money spent on them, the more obedience and loyalty they owe the parent. A catch-twenty-two.
Children may feel pressured by a new stepparent's attempts to woo them. Teens and adult children are old enough to recognize that the stepparent is trying to be friendly but they still have mixed feelings. They are particularly pronounced when the stepparent takes over parent responsibility for gifts, greeting cards (including signing both names), phone calls, and any other means of keeping in touch. Children of all ages are painfully aware that their Mom or Dad has relinquished the task of making time to select gifts and otherwise pay attention to them.
Money and "Equality"
A widely accepted financial concept among parents is that children should be provided with fairly equal amounts. In stepfamilies, that principle is difficult to apply because the family's children typically span a wide age range as well as have unequal needs talents, desires, and capacities. It's not reasonable to give a six year-old daughter and 14-year-old stepdaughter the same allowance or deprive a musically talented son of piano lessons just because his stepbrother isn't musically gifted. Parents who are "absolutely equal" negate the connection between money and need.
Stepparents who are trying to be fair may find themselves embarrassed by what appears to be the selfishness of their children. And there are indications that children's disputes over how parents allocate resources among them are really about whether we love them equally. If money is considered a proof of love, children who don't receive the same amount of material things from their parent or stepparent that their stepsiblings receive conclude that they aren't loved as much as the other children. Examples are comparisons of clothing labels (brand name merchandise versus discount store shopping) and differing allowance amounts for children of similar ages. Another is souvenirs from a vacation. In this case, fiscal generosity refers to distribution, not amount. It helps to remember a basic rule, "Bring for one, bring for all."
Children will see inequities—real or not—and will rely on the confusion associated with the remarriage to play the fairness issue to the hilt. When parents feel like guilty targets, they often ante up for new toys, clothes, or cars and treat visiting children to lavish entertainment when they visit. Visiting children frequently experience the "Santa Claus Daddy" or "Disneyland Daddy" syndrome and there may be no correlation between the generosity and the ability to indulge the children. Dad says, "I have to make up to my children for not being with them all the time."
Our adult sense of fair is influenced by how guilty we feel about how we've reared our children, how much we love them, how hurt we feel they've been by the divorce, and by how vulnerable we feel they are in our remarriage. Era Bombeck described it best, "Guilt is the gift that keeps on giving." If money is tight or the remarried couple does not agree on these expenditures, the extraordinary treatment will rankle other members of the new family.
Talking With Children About Money
After the parents come up with some plan (often developed during stepfamily therapy) about how such matters will be handled in the future, it may be a good idea to talk with all of the children about the family's financial situation. Those adults who counsel children also suggest that the child ask "What is happening?" if money seems like a big deal in the family.
Unfortunately, surveys show that fewer than 40 percent of parents discuss money with their children. A few specialized programs exist but very few of our high school students take any courses in consumer economics. A stepfamily may not have more financial problems than any other family configuration but it does give parents an opportunity to be their children's best financial teacher.
This may be the time to begin teaching your children how to manage money. Children who are excluded from open discussions of family financial affairs or sheltered from the financial realities of life may develop distorted ideas about money. They may make extravagant demands simply because they don't know that money is tight. By discussing your personal priorities and goals, you can provide valuable lessons about trade-offs that are needed for effective use of money. Even a young child can understand that paying for rent and groceries has a higher priority than a new bike or trip to an amusement park.
SUPPORTING YOUR STEPCHILDREN—FINANCIALLY
Millions of stepparents voluntarily provide financial resources for their stepchildren. According to common law, they have a right to be reimbursed by the children's biological mother and father. I don't know of a case where this has been ordered by the court. Time and money bestowed on a stepchild is a gift—of love or necessity. And if the parent and stepparent later divorce, the stepparent is virtually never legally required to provide support.
The Legal Position
According to common law, stepparents do not usually have a direct financial responsibility for the health, education, or welfare of their stepchildren. The law notes two exceptions for direct responsibility:
§ in loco parentis
This is a voluntarily assumed obligation.
"In loco parentis is a Latin phrase which means "in lieu of a parent." Teachers, camp counselors, stepparents, and others who take responsibility for children have a duty to act in loco parentis. This means they have the same power and authority over the children as do the parents, at least during the time that the children are under their control." (Family Law Dictionary, Leonard & Elias.)
It is remotely possible that a stepparent could be obliged to pay in a dire emergency. The court has a primary responsibility to keep people off of public assistance. Given a choice of public assistance or approaching a wealthy stepparent, the Department of Social Services might bring this action against the stepparent on behalf of the child.
§ the "estoppel doctrine"
This prevents a stepparent from taking a different position or going back on a promise if the child would be harmed by the change. It is based on fairness when the following conditions occur:
§ Representation—stepparent offers self as the child's parent including providing financial support
§ Detriment—stepparent interferes with the child's relationship with the biological parent and blocks financial support from that parent
§ Reliance—child relies upon the love and financial support of the stepparent.
If these three conditions exist and a divorce occurs, the court may rule that the stepparent is responsible for child support.
Generally, a stepparent/stepchild relationship does not confer any rights or impose any duties on the stepparent. In a perfect world, primary financial responsibility lies with the biological parents. Back in the real world, a child's biological father may be delinquent in his child support payments while mom has little or no money of her own. After utilizing the new laws and procedures for obtaining court-ordered support, mom's are often pleasantly surprised by the financial generosity of someone they love. Stepfathers are usually willing to help with part of the child's financial support, especially when moms are employed or try to get a job outside of the home in order to help with family expenses.
Do give financial support to your stepchildren. Just don't create a problem for yourself by:
§ Aggressively interfering with the child's relationship with the biological parent
§ Developing a pattern of paying for a child's necessary expenses when the biological parent is willing and able to do it.
The Practical Position
For all practical purposes, this yours and mine business is meaningless when dad loses his job or develops a short-term illness and does not have the income in order to make child support payments. Many employed stepmothers find themselves writing [alimony and] child support checks for their husband's children until he is in a position to resume payments. When this situation appears to be a temporary one, the remarried couple can work out a future way to compensate the stepmother for her financial contribution. If there is a verifiable and significant long-term change in circumstances, it is possible to appeal to the courts to modify the support segment of the original Divorce Agreement. Consult a local attorney about the appropriate procedures in your state.
In this era of multiple marriages, it is also possible for a divorced stepdad to want to continue his former role as emotional and financial parent to his former stepchildren. Even though he may have helped to rear the stepchildren, they consider him their father, and he feels very close to them, except in rare circumstances (the estoppel doctrine) there is no legal responsibility for the financial relationship to continue. Nonetheless, many children need more love and support than seems to be available to them these days. A new wife who attempts to interfere with her husband's sense of duty toward any children may find herself on the outside looking in.
The Emotional Position
Most stepparents don't start counting their expenditures until they feel hurt and unloved—then they feel besieged by financial demands. Little children who continually chant, "You're not my mom/dad," and teenagers who simply use the house as a place to sleep and eat are the most obvious culprits. Stepparents say, "It's very hard to keep giving and not receiving something back." Every child needs to understand the importance of two words, "Thank You."
Expenses for treating both sets of children—movies, clothes, ice cream, etc.—can be hard to handle for the parent with the smaller income. Stepmothers tell me that asking their husbands for reimbursement is embarrassing and makes them feel selfish. Since most husbands are not aware of how the day-to-day expenses for children add up, it is helpful to talk about the necessities and treats beforehand. Parents can then reach agreement about where the money will come from and how it will be spent. That way, either cash will be in-hand or a reimbursement policy will have been established.
A stepmother, with small amounts of discretionary income, is likely to resent being asked to pick-up relatively expensive special clothing for a stepchild when Dad doesn't offer to repay her for the outfit. Stepfathers are likely to feel they are just "meal tickets" or "walking checkbooks" when stepchildren don't even bother to say "Hello" and "Goodbye" as they dash past him going in and out of the house. Sometimes simply acknowledging each others feelings can salve the adult wounds.
Early in the remarriage, some fathers may claim they don't have enough experience with young people to know what they legitimately require and ask the stepmother to make financial decisions. Until the extended family has developed a useful method of communicating about money, this situation will cause resentment all around. The children will see the stepmother as intruding on a negotiation that should be between parent and child; the stepmother will feel she has been put in a position of imposing her standards on the use of her husband's money. However, it is possible to turn this into a win-win situation. Dad can ask his children to make a list of the things they need. Dad and stepmom can discuss the list and come to a joint decision. Then, Dad can discuss his decision with the children.
Even the non-custodial parents can tweak emotions about money. Late or missing child support payments are legend. It's in the area of children's "extras" that a parent can play "Gotcha" when his/her financial circumstances is rosier than that of the remarried ex. In this situation, insisting on equal expenditures can be damaging. For instance, saying, "I'll pay for half of the cost for summer camp and your mother can pay the other half," knowing full well that mom and her new husband can't afford to pay the balance, is a dirty deal for the child.
Big business understands that children are consumers. That's why so many television commercials and special promotions are aimed at them. In addition to direct purchases for items such as tapes and CD's, toys, and cosmetics, children influence family purchases for everything from breakfast cereals to clothing and which fast food restaurant will host the family.
Stepfamilies say, "We want to do the right thing about money, but we aren't exactly sure what that is." The right thing is to teach children about the financial facts of life. Bonnie Drew, author of Money $kills: 101 Activities to Teach Your child About Money, has developed a program for any parent who is grappling with the task of raising money-smart children. While children get most of their money attitudes and values from watching parents, Ms. Drew has designed age-appropriate lessons for children. The activities for ages 3 to 5 emphasize money facts. The activities for ages 6 to 8 emphasize money skills. The activities for ages 9 to 12 emphasize forming desirable money habits or becoming "money smart."
In conjunction with teaching children about money, stepfamilies have basic decisions to make about how available money will be distributed.
§ How much should it be?
§ Is the allowance to be free money for the children or do they have to work for it?
§ How is it "earned"?
§ If earned, who monitors whether the work is done to an appropriate standard?
§ How do they lose their right to it?
§ Who makes the decisions?
The best lesson in personal finance is experience. Parents who allow their children to learn from their own mistakes create an emotional atmosphere for financial responsibility.
Experts suggest that young school age children be given some cash (every few days or weekly) that they can spend without accounting to anyone. As they get older, parents can spread out the payments and boost the amount. At the same time, some of the allowance money is earmarked for a specific purpose such as school supplies or school lunches.
Teenagers learn to plan and save for necessities (and shop carefully for good buys) by receiving a larger allowance. The money is to cover larger necessities such as school items, entertainment, and clothing. To give your teens a better perspective for the cost of these items, have them research and create a budget that covers these expenses. Then negotiate a fair allowance amount. Giving an occasional advance may be appropriate but constant overspending requires help to bring spending in line with available income.
Earning Extra Money
It's a good idea for children to learn at an early age that money must be earned. After deciding what constitutes a reasonable and valuable work contribution to the family's general well-being, consider paying for special chores that go above and beyond the allowance. These chores are typically periodic jobs such as polishing silver, cleaning out the garage, washing the car, or baby-sitting for younger siblings.
Older children may look for part-time employment as additional training for a career interest and for more spendable income. Suitable chores or part-time work give children a financial education and a sense of responsibility. Weigh these advantages against their needs for academic achievement and extracurricular opportunities. Also, consider their abilities to handle a heavier load.
Help your working teenagers to open a checking and savings account and encourage them to save a portion of their income. Parents still have a duty to make sure children spend their money responsibly. It's most important to set up guidelines before your teen begins spending. You may want to develop a rule such as, "If the item you want costs more than $25, you must first discuss it with us."
Since money management is sometimes more than balancing a checkbook, when funds are available, involve your child in an investment. By actually owning a stock (something they are familiar with such as CocaCola® or Apple computers), children can watch the market fluctuate, learn how investments help the growth of the economy, and learn basic investment principles.
Teach mature children about credit. Using it properly is very important because credit is a big part of the American way of life. Many stores permit teenagers to use family credit accounts with parental consent. Of course, you supervise their use of credit closely. By saving the amount of their purchase and paying their portion of the credit card bill when it arrives in the mail (once a month), they'll learn that those little pieces of plastic are not really "magic money."
For children of all ages, consider rewarding savings by matching some of the child's contributions toward an expensive item such as rollerblades, a bike, or car.
I have yet to meet the parent who is happy about paying for extensive phone bills—especially when the children are spending our money pouring out their unhappiness about us or anyone in our new household.
And how many arguments do you and your spouse get into about which long distance calls were made by who's child? One thing is for sure. Attempts to limit calls will be perceived as attempts to limit contact with their other parent—and reported as such!
On the other hand, very few parents can afford to give them free rein. Families have met with at least partial success by:
§ Finding the best long distance carrier for the type of calls frequently made.
§ Restricting calls to the carrier's low-rate periods.
§ Negotiating time limits. If the conversation needs to be longer, the other parent calls back.
§ Finding out what's involved in providing a separate phone for the children. You can pay a specified amount each month. Beyond that, they use their own earned money.
Automobile insurance is discussed in Chapter XX. Purchasing a new or used car with your teenager involves more than price—probably your teen's major consideration. The National Insurance Consumer Helpline has a free booklet called "Shopping for a Safer Car" that is available by calling (800) 942-4242. The booklet provides information about Crashworthiness (vehicle structure, size, safety belts, air bags, side impact protection, and head restraints), and Crash Avoidance (daytime running lights and antilock brakes).
For a discussion on children and loans, see section XX on page XX.
Until recently, once children were out of college, parents were divested of day-to-day responsibility and stopped financially supporting them. Our re-engineered families have adult children back home after college or the breakdown of their own marriages. It is a difficult time for many in terms of both job security and economics.
An entrepreneur in California has developed "The Temporary Residence Agreement" setting forth guidelines for this transition period.
I. Living Arrangements
§ Duration of Residency
§ Overnight Guests
§ Your Room
§ Social Life
II. Home Finances
§ Basic Needs
§ Dining Home
§ Dining Out
§ Credit Cards
III. Financial Assistance
§ General Needs
§ Household standards
§ Any issues not covered above
For a copy of the Temporary Residence Agreement, contact:
c/o Enchanted Tails
10675 Santa Monica Blvd.
Los Angeles, CA 90025
If living arrangements don't go well, you can become an entrepreneur yourself and start an outplacement firm for adult children. Statistics indicate you may have plenty parents as clients.
LOANS TO CHILDREN
Adult children in their twenties and beyond may be financially dependent on parents for college loan payments, graduate degrees, down payments for houses, start-up money for businesses, and even living expenses. Borrowing money from parents has become an accepted practice. Stepfamilies, often stretched to the limit themselves, experience considerable conflict and stress over needy children. Parents and stepparents frequently disagree about their role as a financial safety net and what is owed to adult children. When money is available, the question becomes how best to divide the wealth among children with different needs.
Loaning money to children should never jeopardize stepfamily financial security or become a source of continuing arguments between you and your spouse. Parents need to agree on how much, if any, money they can comfortably afford to give or loan and when it can be done. If it's a loan, repayment terms need to be established. Keep complete documentation about the reason for the loan and information about your child's ability to repay it.
Some children and parents prefer a legal document because it provides a business-like format to a family loan. For small loans, pre-printed loan forms (available at stationery stores) may be sufficient. For sizeable loans to family members, speak with a competent accountant or tax advisor. The IRS determines the "interest rate factor" (charged or imputed) on a monthly basis. Loans have financial implications to the lender such as taxable interest income (whether it is actually paid or not) and potential gift tax considerations. Official loan agreements focus everyone's thinking on a more complete evaluation of finances and how children can repay the money.
It's not a question of trust. Parents do trust their children's intention to pay them back. What they may not trust is the ability to repay and, possibly, the ability to manage their own financial affairs. For most children, it is a matter of pride to live up to the terms of the loan document and "prove" that they are financially responsible adults. A formal loan document may also reassure other members of the family that you expect financial responsibility and are not playing favorites. To ensure that inheritances are equal, record the loan and revise your will with a clause that reduces any child's inheritance by their unpaid loan amounts.
When our adult children ask for loans, they're putting their independence and self-esteem on the line. When we loan them money, we are also asserting some degree of parental power. This combination of circumstances creates double messages. Young adults find themselves asking for advice and financial aid on the one hand and, on the other hand, begging us to "quit meddling" when we assert our opinions about how the money being spent. Underlying the facts—that some children do treat their parents as checkbooks and some parents do bribe their children for love— is the reality that money is often the way we act out separation issues.
Sometimes money between parent and child is being used to keep strings attached or to avoid an emotional break. It may be wiser to introduce your children to a banker or credit union as the lender so they can find out about the real world. You can use your own CD's, stock certificates, or savings to help them secure loans in their own name. You can co-sign loans for large investments such as houses or a business. As long as they meet the repayment schedule, they are building their own credit and you maintain your own assets.
There are times when children need money because they have not been able to manage their income and debt. It is risky for parents to become the banker in this situation. Children must accept the fact that changes have to be made and they won't be happy to hear this announcement from their parents. The knowledge and tact of a personal financial advisor may be the best resource for help. In addition to information on how to solve the immediate problem, fee-only planners (who won't be selling financial products for a commission) offer plans for long-range money management. Parents will find that paying for a financial planner is less expensive than being stuck with a bad debt.
The National Foundation for Consumer Credit provides a free or low-cost Consumer Credit Counseling Service (CCCS). This non-profit organization helps people prevent and solve personal financial problems. Counselors can help develop an individualized budget for paying off bills and for planning future purchases. If the problem is severe, CCCS can establish and administer a Debt Management Program. There are 1,000 CCCS offices in the United States, Canada, and Puerto Rico. Call 1-800-388-CCCS to contact an office near you.
This material was developed with experienced professionals to give you basic information which is not intended either as a substitute for advice from an attorney or as an attempt to answer all questions about situations you may encounter. Because all situations are different, because the law of each state varies, and because you may have questions that are not covered in this material, we urge you not to rely on this material as legal advice and not to make decisions without the advice of a family lawyer whom you should consult for appropriate advice about your specific legal problems. This material is sold as is, without warranty of any kind, either expressed or implied.
© 1997 Flying Solo™. All rights reserved.
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