Most parents want their kids to have good money habits. But they have to be learned and many parents don’t take enough time to teach their kids how to be smart about their money. Neither do most schools. That’s why so many kids have bad money habits.
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! There are so many fun things you would love to do, and it’s easy to forget that you’re setting an example for your kids.
If you want your kids to have bad money habits, here are some of the things you probably do.
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. Using one to buy things and pay it off can help build a credit score. It can be a good habit, so long as the balance doesn’t get out of control.
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. If you can find a way to do it, those savings will be a huge help, well worth the sacifice.
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. Few have the habit of saving money naturally.
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. Older kids might save for an iPad or a phone.
When you’re ready, help them open a bank account. There are a variety of choices for kids bank accounts.
Another alternative is to use an app to help them keep track of what they’ve saved.
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.
My own philosophy is that not all chores should be related to getting an allowance. Some things you should have your kids do just because they’re a part of the family and live in the home. What is expected depends on the age of the kids. Expectations increase with age and ability. It can be a tough balance at times, but it works out pretty well.
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
Kids will often be surprised by how much things cost, but that’s a good thing. Better that they be surprised when they’re kids than when they’re adults and want to move out.