I’ve seen it more than enough: Parents give money to their adult children, and the kids then use that money for online shopping. And most times, in my opinion, it’s done a little too carelessly. These transactions aren’t typically one-time events. They become habits and can be a threat to a senior’s long-term money plan.
For some people, online shopping can fill emotional gaps in their lives – when a debit card’s information is transferred, the person gets a rush of excitement. It can sometimes even happen when the purchase is for something the person doesn’t even really want. When someone is lonely, sad or simply bored, he or she can acquire a sweet chemical rush when making a purchase. The feeling often comes back when UPS drops off a package, and then again when the box is cut open to see what merchandise lies inside.
But here’s the truth: Eventually the rush goes away, the sadness returns and the cycle is sure to repeat.
According to Ph.D. Brad Klotz and Ph.D. Ted Klotz, authors of Mind over Money, compulsive buying afflicts one in 20 people in the U.S. (about the same rate as clinical depression) and more than 75 percent of compulsive shoppers are women. This compulsive spending can be as financially damaging as alcohol abuse, smoking or compulsive eating. While making purchases may feel good, it’s usually not because it’s a good deal. In a very direct language, you may be getting swindled and then say “thank you.”
We all end up with regrets in life. Unfortunately, many parents make up for regrets with money. Somehow, they equate the transaction with love. This is a false belief and can often enable children from becoming responsible adults. It can rob children from the character-building opportunity of overcoming life’s challenges. In a worst-case scenario, it can enable someone who has poor money habits to continue spending as they do, similar to a “friend” who buys an alcoholic a drink to help the friend’s hands from trembling. Yet, despite the logic, many parents, in an attempt to buy love or make up for lost time, continue to enable adult children.
So, what’s the solution?
It can be hard to say no to family – I understand. Especially if you are a kind and gentle person. But you can give what I call “runway.” For example, try setting up a system: You will give your children another three months of financial support but tell them you cannot afford to continue to help. If you have trouble saying no, you may also want to try this line: “My financial advisor said I can no longer give money.” My clients have used that line – and it works!
If you just can’t avoid it, minimize purchases to one per month.
I stress this, because I’ve seen the long-term effects of giving money away – even if you have extra cash today, you may run out of money down the road with bad spending habits. And when you’re no longer in your working years and accumulating wealth, it’s difficult to make up money you gave away earlier in life.
Purchases Made In-Person
There are also things you should be aware of when you make purchases in person. For example, what is that new debit card chip reader you see at most stores these days? Why do you insert your card now instead of swipe it, like the old days?
Well, the reason for the change is actually for fraud prevention. The Federal Trade Commission stated that identity theft has cost Americans more than $1.7 billion. The chip is designed to put a material dent in that billion-dollar dilemma by replacing the swipe technology with a little tiny computer on your credit and debit card.
Yes, I did say computer. That little chip really is a computer. The technology is designed to create a unique transaction code when making a purchase. This code is not reusable. The swipe, however, doesn't have a unique code, so if someone can get the information from your swipe, they can use it for a global shopping spree.
The chip is often referred to as EMV. This stands for EuroPay, MasterCard, Visa, which is the new global standard for credit cards. If these readers are not in all of the stores you shop at yet, you will more than likely see that change soon. That’s because stores that haven’t made the upgrade to chip readers are putting themselves at greater liability for fraud and are more than likely feeling the pressure to change sooner than later.
I wanted to share this information, because many people, especially seniors who are used to the old days (possibly even yearning for the days of writing checks in-store), feared these new contraptions and procedures. But there’s nothing to be concerned about. In fact, you may even be thankful.
Contact PAX Financial Group if you need help putting together a budget or setting up a personal retirement plan. Our holistic approach to financial and retirement planning addresses your financial well-being, your emotional well-being and even your physical well-being.
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