Most people want their kids to emulate them in some way: to have their hair color, to have their honesty, to have their drive. However, few people want their kids to grow up and to go into debt, buy whatever their friends have, or spend like there’s no tomorrow. Although most parents try to teach their children good manners, proper hygiene, and even how to succeed in the work world, many also ignore or neglect to properly teach their kids about money.
Even with the best intentions, parents may be teaching their kids one thing about money but showing them something else. Whether you teach them about money or they learn by watching you, your kids may pick up habits you would rather they not hold on to. You may in fact unknowingly be teaching your kids the wrong money lessons by making poor decisions yourself, or by encouraging them to be frivolous with money. Here are five habits you should avoid passing on.
1. The budget doesn’t matter
According to Citi, in a national survey of 1,500 parents, 70 percent of parents reported that their kids learn about money by watching them and 59 percent by talking about money together. The top activities that parents use to teach their children about money include going to the bank (60 percent), discussing what they can and cannot afford (58 percent), and setting up bank accounts for their kids (53 percent.) All of these activities are a great way to teach children about money, but even if you participate in these activities with your kids, you still might be teaching them other poor habits.
One of the worst lessons you can teach your kids is that your budget doesn’t matter. If you talk about what you can afford but then you regularly purchase something outside of your budget or make impulse purchases, it won’t matter that you discussed whether or not you could afford it. Your kids will learn that it’s OK to spend money even when they don’t have it. This can result in regularly disregarding a budget and possibly even getting into heavy debt.
2. It’s OK to compete with your friends or peers
If you regularly buy your kids things because you want them to fit in or be able to keep up with their friends or peers, you are teaching them that financial competition is healthy. While purchasing something special for them once in a while — or allowing them to use their own money to buy what a friend has — is acceptable, you shouldn’t allow this to become a regular occurrence.
Talk to your kids about how to build lasting relationships that are built on more than just what each person has. Childhood can be a difficult time because all kids want to fit in, but letting your kids buy their way into friendships isn’t a good thing to teach. Also, be sure you aren’t inadvertently teaching them this lesson through your own behavior (say, you go out and buy a red sports car just weeks after Uncle Dan does). It’s important that you regularly set an appropriate example and that you keep your own money out of the picture if your kids depend on it to compete with their peers.
3. You deserve to be entertained
Of course you want your kids to have a fun childhood, and this often includes sports, camps, and other activities. However, if you say yes every single time your kid wants to go to camp, add another expensive activity, or try out a new, pricey hobby, you will teach them that they deserve to be entertained, regardless of the cost. You will also teach them that money buys entertainment and that they need big, exciting activities in order to have fun.
If you do this too often, you risk having kids who miss out on affordable and fun activities like unstructured outside time, playing in their own rooms or the house, spending time with family, and even learning useful hobbies like how to fix things around home. If children grow up needing to be entertained, that habit will carry into adulthood and cost them big.
4. I will never tell you “no”
Be careful, because this poor financial habit has the chance to damage not only your kids’ lives but also your own. If you consistently say yes every time your kids ask for something, you risk having them depend on you financially for the rest of your life. Kids need to have financial boundaries, and if you don’t make them, they will never learn. When you always say yes to your kids, you teach them that they don’t have to work for anything themselves because you will always provide for them. You then risk having an adult child who isn’t financially independent down the road.
So unless you want to have a child who is still asking you to pay for his or her concert tickets and rent at 35 – and, potentially, is still living under your roof because they see no reason to leave — refuse to pay for some things now. Also, consider having them work for their money (like doing chores), and make sure to establish set rules so they know what to expect from you.
5. Credit cards will save you every time
If your kids see you regularly relying on credit cards, that will teach them that they can rely on them, too. Kids need their parents to explain exactly how credit cards work so that they don’t just think that once you qualify for a credit card, you can spend endless money. Talk to your kids about interest and the possible repercussions of using a credit card. Also make sure that your child understands as much as possible, as they get older, about how poor credit and high debt can affect their credit score (which could impact their ability to get a job, a loan, a house, and so on). Be sure that you talk to your kids about the benefits of credit cards and also the cautions that they need to consider.
Obviously, one of the best financial habits you can teach your kids is to value money and to save it. You should regularly talk to your kids about savings and encourage them to save, as well. Additionally, make sure that your kids see you actively saving money and not just spending money. Even if you have the best intentions to teach your kids about money, they will learn the most by watching you. So take the time to discuss money and financial decisions with them, but also provide them with positive financial examples through your own habits and daily financial activities.