We want our kids to grow up living happy, content lives, free from money worries. However, when it comes to educating kids about money, many parents end up teaching lessons they never intended.
“Parents teach by example, and your attitude towards money is the first attitude your children will pick up,” says Mike Sullivan, director of education of Take Charge America. “If you don’t care about money and everything goes on credit cards, your kids will grow up with the same attitude.”
Are you teaching your kids the right lessons about money? Here are three bad money lessons kids often learn from parents — and how to avoid them.
1. What you want, you get. Now.
Have to have that sexy new cellphone? Can’t resist that dress marked down 50 percent — even though it’s not in your budget this month? One of the worst money habits parents can teach their kids, according to Sullivan, is that you have to have everything right away.
This is an obvious problem if your family income is limited. However, if money is not an issue for your family, this habit is even easier to fall into. Adult life involves choices, and it’s not good for kids to grow up thinking they can have everything.
“If you always buy everything right away, you are teaching your kids terrible consumer habits, which your kids will have to overcome if they are to have positive money habits in their adult life,” says Sullivan
Solution: Teach your kids to make choices
If buying a treat while shopping with your kids, make them choose between a toy, a piece of candy or ice cream — they can’t have all of them. In addition, teach them to plan ahead for larger purchases.
“Delayed gratification is the most important thing parents can teach kids about money,” Sullivan says. “Make your kids choose and understand that they have to wait for larger purchases.”
The bigger the item, the longer the wait should be, Sullivan says. For example, if your kid wants a new bicycle, put it on the calendar and explain how long it will take to save for the bicycle. Look at the calendar every day, and allow the anticipation and excitement to build.
Teaching your kids to plan ahead to fulfill their desires isn’t just a useful money habit — it builds important life skills. According to research, kids who develop the self-control to delay the fulfillment of desires grow up to be more successful as adults. In fact, self-control predicts more about how well a child will do in life than intelligence and family affluence do.
2. When it comes to money, it’s feast or famine
Parents who live from paycheck to paycheck inadvertently teach their kids that you have little control over money. If you spend money when it’s there and starve the rest of the time, you are setting your kid up for bad habits that can take a lifetime to unlearn.
Solution: Teach the power of saving
Start your kids out with a piggy bank early on and graduate them to a savings account as they grow a bit older. When they want bigger things, help them save toward part of the purchase cost, so they experience the power of saving money to fulfill their desires.
Remember: You teach by example. If savings and budgeting skills are not your forte, this might be a good time to enroll yourself in a budgeting crash course.
3. All credit is bad credit
While it’s important to teach kids about the dangers of getting into debt, it’s easy to go overboard and give your kids the impression that all credit is bad. In fact, credit instruments like credit cards, car loans and mortgage loans are an important part of adult life. Your kids will need the skills to manage these different types of credit as they get older.
Solution: Teach kids the fine art of credit management
Help your kids build credit management skills early on. To prepare them for using credit cards, give them their allowance on a prepaid card while they are still young. Since they can spend only the money loaded on the prepaid card, this is a great way to help them associate plastic with spending limits.
As your kids get into their teens, substitute the prepaid card for a credit card. Help them use the credit card like they did the prepaid card, setting a set spending limit equivalent to what they can pay off each month. Consider making your kids authorized users on your credit card, so you can monitor their spending habits and help them learn from their mistakes. Or, once they reach age 18, you can help them get a secured credit card (a card that requires a deposit in exchange for a line of credit).