Do You Model Good Financial Behaviors For Your Kids?

by Miranda Marquit · 7 comments

“It’s amazing that parents get angry with their teens and adult children for not using a credit card wisely, but those same parents have invested nothing into helping their child understand anything about personal finance,” says Eva Baker, the founder of the blog TeensGotCents.

Baker is well-versed in the importance of teaching kids about money since she is a teen herself. Her own mother has encouraged her efforts to learn about money, and blog about what she’s learned in order to help more teenagers learn about the importance of developing good money habits as early as possible.

Do you talk to your kids about money? When was the last time you helped them save towards a goal, or talked about the importance of budgeting? Do you model good financial behavior as a family?

What Lessons Do You Teach Your Teens?

As my son approaches his teenage years, I’m thinking more about what I teach him concerning money. We’ve been careful to help him learn how to plan for purchases, save money, and give money to charity. Now, we’re starting to help him learn how to invest, and talking about what makes a good investment.

However, I realize that I haven’t taught my son much about credit so far. He doesn’t have a good handle on debt and credit, and he doesn’t really get what it’s about. This can be dangerous if he grows up and has to figure credit and debt out for himself.

Once, a couple of years ago, we let him borrow against his allowance for something, and we showed him that he would have to pay interest. He made payments each week for a month to repay us, but that lesson was a long time ago, and I’m not sure how effective it was.

“Being purposeful in teaching their children how to handle money and credit wisely is a necessity,” says Baker, of parents. I admit that, so far, there hasn’t been a lot of purpose in the way I’ve taught my son about money, and spending.

So I hope to approach it more consistently going forward. He’s reaching a time in his life when good habits can be developed — and bad habits can be as well.

Be Careful About Adding Financial Responsibility

As you teach your kids and teens to use money, especially credit, it’s important to be careful about adding financial responsibility.

For example; you don’t want to add your child as an authorized user to your credit card and let him or her have unlimited access to your funds. Instead, make sure they understand what’s happening, and that they take responsibility.

Often, this means laying the groundwork ahead of time. Help them progress in steps so they don’t become overwhelmed. Another concern is that they don’t have a good grasp of how money works, and then end up in trouble.

Talk about credit, and show your child how to use it responsibly, paying off the loans as soon as possible. Use your own student loans or car loans as examples. Real world application will allow them learn a lot better.

It’s up to you, as a parent, to teach good financial principles and then help your child put those into action.

Your kids won’t learn how to manage money on their own; if you don’t make it a point to teach your kids, they will likely make poor money decisions. “If a child is terrible with money,” Baker points out, “it’s possible that the parent is a big part of that problem.”

Do you want kids with better money management skills? Start with these four lessons everyone needs to learn and pass on to their own children.

1. Give Every Dollar a Job

Kids need to learn that every dollar needs a purpose early on. You can teach the kids when they get an allowance and birthday money that a portion needs to go to savings, giving, and spending.

money moves for kids2. Say No to Impulse Buying

Saying “no” to kids when they want something in the store is hard, but it’s disastrous if a child gets used to impulsive buying. Instead, help children come up with a savings goal for a particular item. If they are saving $50 for a special toy, then they need to realize that $2 impulse buys on candy or junky toys will ultimately delay their saving goal and make them less happy.

3. Learn How to Comparison Shop

I am still amazed at the many people who don’t comparison shop. Teaching your child how to take the time to do the research will help their money go further. A new iPad might cost $329, but if they shop on eBay or Amazon, they can get a refurbished model for half the price.

Along with comparing prices, teach kids to look up reviews on items. I’ve saved thousands of dollars in my lifetime just by reading reviews of a product before I bought it. It stinks to pay a lot of money for something that doesn’t work like it is advertised. Taking time to search the product beforehand can prevent wasted dollars.

4. Learn How to Bounce Back from Mistakes

Even though you want to equip your child with financial wisdom, there is a good chance they will still make silly money mistakes. That is okay. It’s especially important for kids to make money mistakes now, when only a few dollars are at stake, rather than later when much more money is at risk.

If your child is insistent on buying that low-quality toy or wasting their savings at the arcade, then let them do it. Hopefully, they will learn that spending money in this manner doesn’t make them as happy as they thought it would.

The best way to teach your kids to be financially-wise is to be an example for them. Don’t be afraid to talk to your children about your finances or about money mistakes you made when you were younger too. Your experience is extremely valuable, and not just to you.

What kind of financial habits are you helping your kids and teens develop? How can you prepare them for good money habits as adults?

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{ read the comments below or add one }

  • Rohit Nandgaonkar says:

    Inculcating saving habits in difficult, especially in kids. However, we cannot blame them for this because they have no understanding for finances. I found your recommendations very insightful. I have slowly decided to implement these tactics and hoping eventually my kids will successfully develop the saving habits.

  • Steveark says:

    My parents were great with money. They explained that it isn’t smart to borrow money to buy things like cars, furniture or anything really except a house. And even on a house the goal is paying it off as early as you can. Also that every credit card must be paid in full every month, never run over a balance, not even once. And those lessons stuck because I always bought cars with cash and never ever ran a credit card balance. I don’t think you have to do much more than explain how you handle money and let them see the success you’ve had. When my dad showed me he was a millionaire well before he retired I was very impressed because he wasn’t a high earner.

  • Emily says:

    We only have a toddler, so the teen years are a few years away, but I hope that our daughter will enter life as an adult with a basic, but functional understanding of budgeting, credit, and investing. The lessons I learned from my parents were spotty, but they stuck with me. I’m hoping to be a bit more consistent with our daughter.

  • Bill at FamZoo says:

    Hear, hear for being intentional and consistent when it comes to teaching kids about money. Automation through new tech can help parents “approach it more consistently going forward” by nudging them to have financial interactions with their kids and automating simple financial/incentive systems for hands-on practice. Here’s a list of over 30 apps/applications that help parents teach kids good money habits: http://list.ly/list/oD

  • Money B says:

    I remember very little about what my parents told me about money, but I remember very well how they treated their money. The example you set is the most important lesson you can provide to your children with regards to money.

  • Douglas Glickert says:

    Can you send me an article about the life skills the kids need to learn in high school that will help them be ready for college. I couldn’t find it but I thought I remembered it.

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