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5 bad money habits you may be teaching your kids

Est. 5 min read

One of the most important things anyone can teach their kids is to have good money habits.

From the time they’re small and able to count, parents have the chance to explain to kids the value of money, that it doesn’t actually grow on trees, and that sometimes, you need to save it and wait before you can buy what you want.

As they get older, opportunities open up to teach sons and daughters the concepts of compound interest or how credit works.

But kids (the observant bunch they are) may end up inheriting some poor money habits you’re unwittingly teaching them. Though it may slip your mind or come about inadvertently, you may leave a bad influence on your kids, who will watch, emulate and carry on the same behaviors into adulthood.

Have you made some of these money mistakes around your kids?

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Encouraging a sense of entitlement

It’s a common scene that plays out in most stores, restaurants or anywhere families go: the child who throws a hissy fit whenever he or she doesn’t get the toy or other shiny object their heart desires. And their parents may often give in and buy the item just to pacify them, enabling the child an entitled, “I want it now” attitude to have whatever they want, just because. Why do the tantrums continue? Because you permit them.

And you may need to let the crying continue as you leave the store, get in the car and make the drive home. Don’t be hard on yourself thinking it’s cruel to say “no” to your son or daughter; they need to learn that you can’t always get what you want. But don’t leave it at that, since it’ll happen again on your next shopping excursion. Take it as a time to start teaching them that stuff isn’t free. It costs money that you have to work for before you can spend it. Learning patience until you can afford to buy something (i.e., delayed gratification) is the better money habit they should be picking up on.

Making excuses of your own

Using the excuse that you aren’t able to buy your child what they want because you can’t afford it can affect a child’s views on money in a few ways. The child may start to develop a negative, unrealistic opinion towards money; by making the money mistake of saying that you can’t afford anything, it sends them the message that money is a rare commodity that needs to be spent immediately when obtained.

Even the youngest of children will become wise to this “We can’t afford it” excuse making; a recent study even indicated that 68 percent of kids don’t believe their parents when told they can’t afford something that they really can. Explain to them the differences between wants, needs and priorities, and be honest. You can’t have that new toy because you’ve got one just like it, tell them.

Instead of copping to sound bite excuses when your son or daughter wants a new car, or pleads with you to finance a new drum set or ski trip with friends, turn it back around as a question. Experts recommend asking, “How can you afford it?” This instills the idea that they can be decision makers with their own money; if you truly can’t afford something, how can you earn more money until you can afford it?

Giving them free money

Awarding your child an allowance is fine; if it’s attached in return for doing chores and tasks around the house, it instills a sense of responsibility that they need to earn their own money. The problems start when you become a walking bank or ATM, handing out free spending cash for any request, excuse or reason they give, like they’ve spent all their available money, or simply don’t have enough for X purchase.

The simple solution: Learn to say “NO.”

Deny them the money if they ask, reinforcing that they don’t deserve it because: 1) they need to work for it, and 2) they haven’t properly budgeted their money. It doesn’t matter if it’s a few bucks here or there, since the money can add up at your expense. Make it a chance to start demonstrating to your kids the rewards of hard work, saving money, and using discipline when they spend it.

Never visiting the bank

Even for adults, it may seem a bit old fashioned to frequent the bank, since online and mobile banking give little reason to set foot in a brick-and-mortar location anymore. But at least we adults know what the experience is like. Younger kids born in the internet age can’t relate to the banking experience if they never set foot in one; they can’t grasp the importance or even feel nostalgic if they wanted to. It can leave them unable to understand the workings of going to the bank and transacting with real money.

To make “money is a serious thing” tangible to them, make a visit to your local walk-in branch together. Let them meet the teller and see how cash is deposited and withdrawn. With future visits, they can begin to comprehend that money is tangible and needs to be saved in a safe place like a bank before it can be spent.

Keeping them in the dark

Many parents may be prone to talking about money matters between each other and not around the kids. You might not want to share too much information that they wouldn’t understand, goes the thinking, so there’s no point in troubling them about it. But doing so is a bad money habit that can do your kids more harm than good.

By not keeping them abreast of planning out the household budget, they’ll never learn about paying for rent or mortgage, utilities, groceries, pet supplies or other revolving expenses. Instead, let your kids in on the budgeting process; it’ll get them to understand that bills need to be paid first before you can spend it for fun. Depending on their age and savvy, you might even get them involved in planning the weekly/monthly family budget for things like errand shopping.

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Develop good money habits in you and your kids

While it’s important to set a good example for your kids, you may unknowingly be committing some of these bad habits (and others) that your children may adopt through observation. Keep reinforcing those habits, and it sets the template for your kids to repeat the same mistakes.

Be conscious of your habits and behaviors towards money. Talk with your kids about money. Be honest, direct and don’t be afraid to communicate with them about family finances. By teaching the right money lessons, you’ll teach them the right money habits, and adopt some new ones of your own, too.

Image: Carissa Rogers

Published on November 21, 2016

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As a personal finance journalist, Paul specializes in financial literacy, loans, credit scoring and the art of negotiation. He's covered some of the nation's most inspiring financial success stories for national publications including CNN, and US News & World Report and has a passion for helping Americans overcome their debt.
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