Helicopter parent ruining your finances?

Your parent just wants what's best for you, but sometimes their "help" can harm, rather than improve, your finances.

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Does your parent monitor every aspect of your life, attempting to solve every problem – no matter how basic – before giving you a chance to figure it out for yourself?

If so, you’re likely dealing with a helicopter parent.

These parents routinely hover over their children, micromanaging their lives for fear that their kids will bring harm and failure unto themselves with poor decisions. More millennials are experiencing helicopter parenting into their mid- to late-twenties, often leading to stunted financial stability and success.

Dr. Chester Goad, a university administrator and member of the Editorial Review Board for the Journal of Postsecondary Education and Disability, explained the key difference between "engaged" parents and so-called "helicopter" parents.

"An engaged parent teaches kids to make their own decisions and trains them for everyday life, and that includes financial decisions and responsibility," Dr. Goad said. "It's the tethered parent who neglects teaching those things and then intervenes, or makes those decisions for [their children], who can become problematic."

This tethered parenting style doesn't fare well for millennials who, according to FINRA’s 2014 report "The financial Capability of Young Adults– A Generational View," already rank lowest in financial literacy compared to previous generations. According to the survey, only 24% of millennial respondents answered four of five financial literacy quiz questions accurately.

3 Ways Your Parents Are Sabotaging Your Financial Success

Dr. Goad explained other parental behaviors that impede millennials' ability to be financially aware.

"Some parents avoid discussions of money because it's uncomfortable. It's healthy for our kids to understand our finances and to understand what that means for them in the future," Dr. Goad said. "They need to know if they're going to need to pay for their own college tuition or accept a work-study position in college. When parents start early teaching kids to work hard, to take responsibility and to endure consequences rather than avoiding them, they're empowering them for success."

Here are some instances where millennials face lost opportunities at financial education due to helicopter parenting.

1. Cleaning Up After Your Decisions

College is a pivotal time for Gen Y's overall development: they physically leave the nest, are legally considered adults at the age of 18 and face new financial challenges like school tuition costs, student loan offers and more. Parents who go the extra step of securing a parent loan for their children might think they're doing their college-bound student a favor. In reality, however, the adult children are not given the ability to weigh their financial reality against their wants.

Instead of allowing millennials to recognize their $20,000 college budget cannot accommodate a $70,000 private school education, and then making a deliberate choice to make concessions as a result, some parents come to the rescue by taking out a personal loan on the child's behalf. This behavior not only prevents millennials from understanding the financial repercussions of their choices, but also becomes a financial burden for the parent.

2. Preaching the Evils of Credit Card Use

According to the FINRA report, the millennials are some of the most likely to live without a credit card. Only 62% of Gen Y owns at least one credit card, compared to Baby Boomers at 76%.

Helicopter parents who have also had bad experiences with credit card debt might dissuade their children from using a credit card, only recounting the adverse outcomes from their own financial management. What doesn’t happen as often is parents guiding millennials on what it means to use credit cards responsibly.

Using credit cards has a number of benefits that yield advantages over time, such as helping to raise your credit score (types of credit used accounts for 10% of FICO scores), offering extended purchase protections and providing a rewards points or cash back per use.

3. Keeping You on Their Payroll

Some parents choose to keep their children financially dependent. According to The Clark University Poll of Parents of Emerging Adults1,44% of parents give "frequent support when needed" or "regular support for living expenses" to their 18- to 29-year-old children. Yet 42% of parents polled said the main topic of conflict with their child at that moment was money.

Managing utility bills, rent, grocery budgets and other discretionary expenses is a reality all adults face, but if millennial adults are still receiving a regular allowance from their parents, these everyday costs become shocking – and even scary – obstacles when parental funding is eventually cut.

What to Do About It

In an interview with GOBankingRates, clinical psychologist Traci Lowenthal Psy.D., founder of Creative Insights Counseling shared a few key ways for Gen Y to gain financial freedom with minimal intervention from parents.

Start taking (small) risks. Start making small financial decisions early and often to develop confidence and problem-solving skills that become important when financial challenges arise.

"Helicopter parenting can have a definite negative impact on a young person's ability to create financial success for themselves," said Dr. Lowenthal. "Without the opportunity to make their own financial choices as a young person, while still receiving guidance from their parents rather than instruction, they are less likely to develop the skill to do so as they age. Small financial (low risk) choices are imperative in allowing learning to occur as well as teaching important critical decision making skills."

Set boundaries, and share successes. At times, parents voluntarily offer hands-on assistance because they don't know where their children stand with a problem, nor have they witnessed an example of when their adult child has overcome a similar dilemma. A way to gain parents' trust and establish independence is by being consistent about boundaries, and communicating when a right decision was made.

"A valuable skill for adult children to learn is that of boundary setting. Boundary setting with helicopter parents can be particularly important. Appropriate boundaries need to be clear and consistent. Letting a parent know that you value their thoughts and opinions while still making your own choices is paramount. Sharing successes with parents and discussing problems related to decision making can help parents feel involved but let them know you are attempting to make sound choices on your own," Dr. Lowenthal said.

Talk to a professional. Millennials should recognize that there will be times when they don't know the answer to a financial obstacle — instead of falling back on old patterns by relying on your parents for a solution, turn to a professional who can provide unbiased feedback and recommendations.

"Adult children can and should seek out professional advice with regard to financial planning. Just as with any skill, financial planning is one that evolves and changes over our lifetimes," Lowenthal advised. "Creating spending and saving strategies early is incredibly important for healthy development and financial independence."

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This article was written by Jennifer Calonia from Forbes and was licensed as an article reprint. Article copyright July 7, 2015 by Forbes.
The statements and opinions expressed in this article are those of the author. Fidelity Investments cannot guarantee the accuracy or completeness of any statements or data.
This reprint is supplied by Fidelity Brokerage Services LLC, Member NYSE, SIPC.
The third party provider of the reprint permission and Fidelity Investments are independent entities and not legally affiliated.
The images, graphs, tools, and videos are for illustrative purposes only.
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