6 Mistakes To Avoid When Teaching Your Kids About Money
‘Lead by example’ couldn’t be a truer saying when it comes to teaching children about personal finance. But, as many of these great quotes, it’s much easier said than done.
Instant access to credit cards, the ability to finance pretty much everything, and the never-ending hamster wheel of “keeping up with the Joneses” can make being a role model really challenging. But ignoring it isn’t an option either if you want to raise financially responsible adults. After all, debt can destroy a person’s entire adulthood, and it can quite literally happen in the blink of an eye.
With that in mind, here’s a look at six common pitfalls to avoid when trying to establish healthy financial habits for your kids.
Avoid These Mistakes When Teaching Your Kids About Money
- Ignoring the Elephant in the Room
Parents talk to their children about shopping, even letting them make choices when it comes to big ticket items like a TV or furniture. But they may not be talking about the basics of personal finance like household budgets, saving and setting financial goals. Understandably, parents want to shelter their children from the tough discussions, but by doing that they’re setting them up to fail.
Without understanding money and financial responsibility, your kids can end up in debt or make other bad financial decisions. Even if you are struggling from paycheck to paycheck or can’t get out from under the debt, making your child or children part of the conversation will go a long way in teaching them about managing money.
Some parents think their children won’t understand complex topics like personal finance, but they can start learning as young as six with the right tools and the right explanation. Instead of sending your child out of the room when discussing a financial budget or savings plan, include them in the conversation. Do it all the time and everywhere, whether you’re buying food at the grocery store, paying bills, banking online, or even mapping out your budget for the coming weeks or months. The more your children see how you interact with money and face financial responsibility the better prepared they’ll be to take on those responsibilities themselves in the future.
- Lead by Example As Much As Possible
Children look up to adults and tend to mimic their parents’ behaviors in particular, including personal finance choices and attitudes. Have a penchant for blowing money at the department store? Your kids may develop one, too. Known for being frugal and saving every penny you amass? Your children may pick up those habits too. If you fall into the spending category, children may follow your cues, creating a cycle of debt and bad financial choices that will follow them into and throughout their adulthood.
The best way to combat it is to lead by example. That means prioritizing things like saving for retirement and paying down debt rather than emphasizing saving for a vacation or charging up the credit card for back-to-school clothes. It also means forgoing excessive credit card usage and only purchasing things you can actually afford with the money currently in your account. By simply reigning in the spending and your use of credit cards you’re modeling healthy financial behavior your children can benefit from for the rest of their lives.
- Avoid Instant Gratification
Instant gratification is the enemy of everyone and retailers know that. It’s the reason cheap, throw-away items are always placed at the cash register or in the eyesight of children. Resisting the temptation to purchase these items can serve to teach children that the best things come to those who wait.
Same goes for giving in to children’s every whim. If you buy something every time you enter a store, your children will come to expect that. Instant gratification can be a powerful and negative motivator if left unchecked, and the way things are set up in the United States today doesn’t help with that; Amazon, convenient as it is, makes impulse buys very easy and all-too-common.
A better strategy—one that will make ch