There are many things that parents shouldn’t do when trying to instill good financial skills and values in their offspring. Lots of them are common sense – things like not spoiling your kids by giving them everything they want.
Here are some that either are not that apparent or not that easy to implement.
Giving them conflicting money messages.
Many couples never talk about their money history, expectations and attitudes before they have children. Your approach to things as mundane as whether or not to give an allowance or to provide monetary awards for certain accomplishments can cause conflict between you or confusion in your children.
Agree on the values and expectations you want your children to have in the area of personal finance and consistently teach and enforce those between the two of you (and clue in any significant others in your family such as aunts, uncles, grandparents and etc).
Derailing them with sudden windfalls.
The very worst time to load up your child with lots of money is in their late teen years. All of us are trying out things at that stage of life, testing our beliefs with new experiences and becoming our own person. Dumping a windfall on your child at that age can easily derail them from discovering their own way in life. If you think your child will inherit, earn or receive sudden money in their teen years, take measures to train them beforehand, or to legally withhold the money until they mature.
Instilling emotional laden feelings about money.
Messages about money can be filled with emotion. Money may mean power or control or misery or any number of other things to you. Money is a tool. Money is neutral. It is how you value it, use it, spend it, invest it or give it away that causes the emotion.
Throwing money at your child won’t make up for lack of your time and attention. Yelling at your child when they miss their budget isn’t instructive. Blaming your inadequacies on lack of money is an untruth.
Be careful to convey your money messages with neutrality.
Neglecting to give them practice with money.
Most parents let their kids have some kind of money – either via an allowance, a job or chores around the house or from gifts. Many parents neglect to require increasing levels of responsibility from their children in meeting their own needs using that money. Making choices and decisions of increasing complexity and consequence is important in the maturation process. As your child matures, turn over increasing larger amounts of money to them and make them responsible for providing their own clothing, school supplies, gifts and more.
Bailing them out.
A parent’s natural instinct is to help their child through his or her difficulties. Sometimes that is not the best course of action. Unfortunately, none of us come equipped with the knowledge, ability and experience we eventually need in life to deal with money issues.
Kids need to learn through experience that there are real consequences to mis-managing their funds, and it is much better to let them learn that while they are under your wing. It costs less, has lower impact and you can keep an eye on the situation and help them learn from their mistakes.
If your child’s funds run out before they meet all of their responsibilities for the period, don’t bail them out. If your college student runs up their credit card bill and can’t pay, make them work it out. If your kid puts the car you gave him down as collateral for a title loan, make him pay you back and take back the car if you save it from the loan company.
Readers, what other things should parents avoid when teaching their kids about money?
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Avoid These Financial Mistakes with Your Kids — 11 Comments
My kids are still little (2 and 4) but I’m trying to teach them as much as I can about money without being annoying. Most of all, I want them to know that we can’t afford some things because we’re saving for others.
The good thing (and sometimes the really bad thing) is that the little angels are watching and soaking in your money attitudes and habits. Teach them, but practice what you want them to learn. If you want them to be able to talk about money, talk to your spouse about money, talk to your kids about money, let them see you talking to others about finances. If you want them to learn that your are saving for goals, maybe you have a family meeting (even with them around) to set out your goals and mark progress towards them, saying things like, “the money we didn’t spend on that new car put us xxx dollars ahead on saving for our new house.
Those are right, and I definitely agree to each one of them. Giving too much can cause them to be more dependent, so parents should know what’s the right amount to give their children, and help them be more responsible in life.
That’s a great blog post. Most of the parents are protective about their children and mostly give wrong teachings on financial matters. This is one of the reasons why so many teens make financial mistakes while growing up and end up with so many financial burden that they can’t shed over a life time.
Keeping this in mind, my parents taught me from the very childhood about saving from everything I got. My parents taught me to use credit cards frugally and that’s why I’m least dependent on them and always have a good credit. What I’m today financially is because of what my parents taught me from my childhood days.
I soaked up a lot by my parents simply explaining why they did what they did with their money. They were very clear that they were not spending money in areas like nice cars, new home entertainment items, or even eating out often so that they could make sure they sent my siblings and I to private school. They also always saved for family vacations every year. It definitely rubbed off on how I see money today.
Hopefully, “they were very clear” doesn’t mean you got lectured all the time! Sometimes lectures are good though, as they do tend to stick with us when repeated over and over. Sometimes they backfire, as when kids decide to consciously do just the opposite of what we are trying to convey!
There’s been times when I haven’t given my son his allowance on time. It’s supposed to be given on Friday, but sometimes it’s Sunday, or Monday, or multiple weeks are given at a time. I sometimes worry that I’m not teaching him that bills should be paid on time, and I’m trying my best to remember to give him his allowance first thing on Friday morning – with the reinforcement of “It’s Friday, and your allowance is due – here you go.”
Try checking out a copy of The Bank of Dad from the library. He has a system where you can track allowances in Quicken and the kids have to ask to make a withdrawal from their account – puts the kids in charge of remembering to ask for their allowance.
And yes, I think you may be right – kids learn much more by watching what we do than by listening to what we say!
There is money training available for kids, if anyone is interested. Written by a qualified financial adviser and including advice from celebrity guests like Warren Buffett, the training is a series of short videos for children aged 7 – 17. The first lesson can be tried out free at http://www.tiny.cc/money4kids.
There are many things that parents shouldn’t do when trying to instill good financial skills and values in their offspring. Lots of them are common sense – things like not spoiling your kids by giving them everything they want.
My kids are still little (2 and 4) but I’m trying to teach them as much as I can about money without being annoying. Most of all, I want them to know that we can’t afford some things because we’re saving for others.
The good thing (and sometimes the really bad thing) is that the little angels are watching and soaking in your money attitudes and habits. Teach them, but practice what you want them to learn. If you want them to be able to talk about money, talk to your spouse about money, talk to your kids about money, let them see you talking to others about finances. If you want them to learn that your are saving for goals, maybe you have a family meeting (even with them around) to set out your goals and mark progress towards them, saying things like, “the money we didn’t spend on that new car put us xxx dollars ahead on saving for our new house.
Those are right, and I definitely agree to each one of them. Giving too much can cause them to be more dependent, so parents should know what’s the right amount to give their children, and help them be more responsible in life.
Thanks for the vote of confidence on what I wrote!
That’s a great blog post. Most of the parents are protective about their children and mostly give wrong teachings on financial matters. This is one of the reasons why so many teens make financial mistakes while growing up and end up with so many financial burden that they can’t shed over a life time.
Keeping this in mind, my parents taught me from the very childhood about saving from everything I got. My parents taught me to use credit cards frugally and that’s why I’m least dependent on them and always have a good credit. What I’m today financially is because of what my parents taught me from my childhood days.
That’s great Martha! Be sure to tell them – parents often wonder at how effective they were at parenting (at least I do!).
I soaked up a lot by my parents simply explaining why they did what they did with their money. They were very clear that they were not spending money in areas like nice cars, new home entertainment items, or even eating out often so that they could make sure they sent my siblings and I to private school. They also always saved for family vacations every year. It definitely rubbed off on how I see money today.
Hopefully, “they were very clear” doesn’t mean you got lectured all the time! Sometimes lectures are good though, as they do tend to stick with us when repeated over and over. Sometimes they backfire, as when kids decide to consciously do just the opposite of what we are trying to convey!
There’s been times when I haven’t given my son his allowance on time. It’s supposed to be given on Friday, but sometimes it’s Sunday, or Monday, or multiple weeks are given at a time. I sometimes worry that I’m not teaching him that bills should be paid on time, and I’m trying my best to remember to give him his allowance first thing on Friday morning – with the reinforcement of “It’s Friday, and your allowance is due – here you go.”
Try checking out a copy of The Bank of Dad from the library. He has a system where you can track allowances in Quicken and the kids have to ask to make a withdrawal from their account – puts the kids in charge of remembering to ask for their allowance.
And yes, I think you may be right – kids learn much more by watching what we do than by listening to what we say!
There is money training available for kids, if anyone is interested. Written by a qualified financial adviser and including advice from celebrity guests like Warren Buffett, the training is a series of short videos for children aged 7 – 17. The first lesson can be tried out free at http://www.tiny.cc/money4kids.