Good money habits don’t come from nowhere. They have to be learned. But many parents don’t take enough time to teach their kids how to be smart about their money. Neither do most schools.
Good financial habits are a help lifelong. Not only will it help your kids to manage their money better if you teach them good habits, it will decrease the odds that they’ll keep coming to you for loans when they’re adults. Not that you can’t help out when there’s true need, but it’s nice to know they have the skills to only ask when there really is need.
Not bothering to teach them now is so much easier at the moment, though!
1. Use credit cards when you want it but can’t afford it.
Who cares that a new widescreen TV doesn’t fit in the budget? You have a credit card, and that TV would look great with the new entertainment center. Buy it now!
If this is the kind of example you set for your kids, why would you expect them to do any different when they’re old enough to have credit cards? They need that example of saving up for wants, and knowing the difference between wants and needs if they’re going to be smart about money.
2. Don’t talk about credit.
Credit cards are for fun, right? Kids don’t need to understand the finer details of how they work!
There’s a huge advantage in teaching kids as much as you can about credit cards and credit scores. A good credit score helps to get lower interest rates on major purchases such as cars and homes. It’s a huge advantage for them to understand how credit scores effect them when they reach that point in life.
At the same time, don’t teach them that having debt is a good thing. There are better ways of maintaining a credit score than by carrying a load of debt on a credit card.
3. Don’t save for a rainy day.
Rainy day, schmainy day. Why save up an emergency fund when there are so many things you could be buying instead?
Saving for a rainy day can be hard if your budget is tight, but it can keep you away from the credit cards when unexpected expenses pop up.
4. Never talk about finances.
Your kids don’t need to know anything about family finances, whether they’re good or bad, right? They’re just kids!
It always amazes me how much kids can understand about the family’s financial situation. While you don’t need to stress them with your money problems, letting them know about monthly bills, how to save when you go shopping, and in general how to manage money is a good idea.
5. Don’t encourage them to save money.
When your kids get an allowance, let them spend it as they please. They’ll figure out the rest eventually, right?
Kids love spending money. Many will spend all they have in one spot if they’re given the chance.
If you want them to learn to save, help them find a goal to save for. When they’re younger, it could be a particular toy. One of my daughters right now is saving up for a harp, and a basic, student-level harp runs about $400. It will take her a while, but she’s determined.
6. Don’t have them work for money, ever.
There’s a lot of back and forth about whether allowances should be earned or given. It’s a parenting choice, and you no doubt have your own thoughts on the matter.
But if you don’t want your kids to understand about money, just give them what they ask for, whenever. Don’t worry about why they want it or if they need what they’re asking for.
Having them do chores either for an allowance or for extra money can be a good teaching tool. So can having them run a little business, whether it’s the classic lemonade stand or babysitting younger kids in the neighborhood.
7. Never teach kids to make a budget.
Kids don’t have much money that they have to spend, so why bother with teaching them budgeting skills? They won’t need that skill for years!
That’s the key, right there. Eventually we all need budgeting skills. It’s not just about saving up for a goal. It’s about wise use of the money they have.
You can start by having the kids help with the family budget, or just a part of it. Go over grocery bills with them, and have them help you figure out how to manage it wisely. Take them grocery shopping with you so they can see how fast it all adds up.