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8 Habits to Avoid When Teaching Kids Financial Responsibility

By Jacqueline Curtis

kids and moneyIf you have children, you might feel responsible for teaching them everything they need to know. I have two young children, and am constantly helping them work on their math skills, pushing them to read more, and reminding them to practice whichever sport they’re playing that month. But as parents, it’s our actions that say far more than any words of instruction or encouragement we might offer.

Kids watch the way we react to certain things. What you think is a simple statement said in passing could be internalized by your children and used as a catalyst for future attitudes and habits. One area in which this has life-long repercussions is finance. In fact, you may not even realize that you’re projecting some of your bad financial habits onto your kids long before they open their first bank account.

But in acknowledging and dealing with your faulty habits, you can save your children from the same mistakes and improve your financial situation at the same time.

Bad Financial Habits Parents Should Avoid

1. Making Money Taboo

Growing up with four siblings, money was not something my family ever talked about. We knew that my dad worked and my mom stayed home, and that buying clothes for five kids was expensive. However, we never knew how much my father earned or what our financial situation was like. Looking back, I know my parents did this to protect us from financial woe, but I sometimes wish I had known more about our money status, bills, and budget – it would have created a team-like effort.

Unfortunately, my family isn’t the only one who found money to be a touchy subject. A 2010 survey by American Express found that 36% of parents report that discussing money and allowance with a teen is roughly as stressful as negotiating the price on a new car.

When you make money a taboo subject in your home, it can create a type of mystique surrounding finances. I know that when I moved out as a young adult, money remained taboo, which led to an “out of sight, out of mind” approach to finances. I didn’t want to talk about money to my spouse, and the prospect of creating a personal budget scared me.

Changing the Habit
Don’t shield your kids from budgets, financial decisions, and money discussions. While you might feel like you’re protecting them from unnecessary stress, you could be robbing them of an excellent learning opportunity. A Charles Schwab survey found that parents thought their kids needed the most financial help in how to stick to a budget (48%) and how to save money (42%). Start there: Working together on a budget and having regular family meetings where you discuss major purchases (for example, “Would you rather go on a vacation, or should we save for a new car?”) makes your kids feel like part of a team. One day, when they grow up and move out, they’ll be grateful that money was made to be a frequent and comfortable topic in your home.

2. Fighting About Money

From time to time, you may find yourself in a finance-related tiff with your spouse. An occasional spat doesn’t have the same impact on your kids as a constant war over money. But when the mere mention of money causes your blood to boil, you might be causing your kids stress.

It’s a given that talking about money can cause conflict. But a 2012 study by East Carolina University found that kids who frequently heard their parents argue about money were more likely to have multiple credit cards and only pay the minimum balance by the time they got to their junior and senior years of college. Making money a constantly charged and conflict-ridden topic seems to create an unhealthy attitude toward finances.

Changing the Habit
When my husband and I need to have a serious money talk, we have a “budgeting date” by doing the following:

  • Put the kids to bed
  • Prepare dinner
  • Gather our various bills and documents
  • Go over them together while looking at our current budget
  • Come to a solution that works for both of us

In my case, the low-key atmosphere of a date night reduces some of the tension that comes along with discussing finances. And, with the kids safely in bed, we can have a serious talk without the distractions or the guilt that can come along with heated exchanges.

arguing about money

3. Never Defining Needs and Wants

I’ll admit that I’m the Queen Bee when it comes to indulgence, particularly when it comes to my kids. Growing up in a big family and on a single income, we didn’t have a ton of money for extras. Instead, I was often told that we couldn’t afford a lot of the clothes, games, and toys my friends had. Now, with two kids and a dual income household, I sometimes forget that it’s okay to say no to my children when they want something.

But I’m doing my kids a disservice by not taking the time to delineate between needs and wants. I could unintentionally be raising kids who think that desiring something is reason enough to purchase it. Without the delineation between needs (something that I’m required to provide for my kids’ survival) and wants (something that would just be nice to have), my kids could grow up and find themselves either seriously in debt, or feeling deprived.

Changing the Habit
Lately, I’ve been changing my language when I talk to my kids when they get a case of the “gimmies.” Instead of telling them we can’t afford something, I tell them that it’s not something we need – we won’t afford it. We’ve talked about how it’s my job as a parent to provide the things they need, such as food, clothing, and shelter. And, I’ve set up an allowance system (just a simple amount per week in exchange for doing chores) for my kids to use for their wants.

Take the time to talk about needs and wants in a context that children understand. Consider this 2006 Pew Research Center survey – 88% of Americans thought that a car was a necessity, while only 4% said an iPod was a must-have. Talk about common items in your home or community and decide as a family whether you deem them wants or needs, and why. It will help your kids rethink their priorities when it comes to spending money.

4. Being Dishonest

Sometimes, it can be tempting to shirk your responsibilities when it comes to paying bills or fulfilling contracts. It’s human nature to see creditors as enemies. But when you’re dodging payments, being dishonest about how much you owe, or even fighting a debt for which you’re clearly responsible, you send a message to your kids: We’re above the rules.

It might seem a small thing to skip a payment or avoid a phone call so you don’t have to talk to a creditor, but your kids are watching. They see the way you react to creditors, and it can make money and debt villains in their minds. One day, when it comes time to get a credit card, borrow money, or pay a debt, that attitude can permeate your adult child’s money management skills. It could result in collections, past due accounts, and even poor credit.

Changing the Habit
Stop thinking of yourself as the protagonist and your creditors as the antagonists. Trying to avoid or get out of payments doesn’t make you the hero – it means you’re voiding a contract that you agreed to. Let your kids see you take responsibility for your finances and for your mistakes, even when it’s unpleasant. Let them see you’re not a victim. That behavior can help them responsibly deal with money and debt – and keep you out of financial hot water.

tearing up bills

5. Placing Blame

We’ve all been there: You’re frustrated about the power bill and want everyone to know, so you start on a tirade of how you wish everyone would just turn the lights off. You storm around the house, flicking off light switches while your kids try to avoid you. It’s the equivalent of my mom yelling that she didn’t want to “heat the street” after I’d left the front door wide open in the winter. And while that little lecture seems harmless (and sometimes necessary), you might be wrongly placing blame on your kids.

By all means, teach your little ones the importance of not wasting money: You turn off the lights to save electricity, which costs money. But throwing blame around – especially when money is tight and tension is high – can make your kids shoulder a lot more responsibility than they should. Because after all, if money is tight this month, chances are it isn’t the electricity bill that’s really stressing you out – it’s the fact that you’re spending more than you’re earning.

Changing the Habit
I think it’s good form to apologize to your kids when you’ve placed unnecessary blame on their shoulders. It teaches them that it’s okay to make mistakes, and is an excellent time to explain why you’re really upset and refocus as a family. Talking about why it’s important that you work together to save money when your budget is tight can help your children understand the importance of pitching in without playing the blame game and feeling bad about finances.

6. Competing With Others

Peering through your front window at the neighbor’s new car or feeling jealous of a friend who just bought a new house might seem like no big deal to you, but your children could have bigger ears than you think. The impact is even greater when your constant comparisons actually drive you to spend more money in order to keep up with everyone.

This sends a clear message to your kids: Your success and worth can only be measured in relation to your peers. It’s par for the course for adults who want others to see their success in a tangible way, but consider how that message reads to your children. Perhaps they only feel worthy if they’re at the top of their classes, the captain of the football team, or wearing the most expensive clothes at school. When understood from the context of a child, measuring your self-worth against the material belongings and status of another person seems, quite frankly, a little ridiculous.

Changing the Habit
Unfortunately, the only way to change the habit of competition is to look at yourself to determine why you compare yourself to others. For some, it’s the need to always be on top. For others, it could be the compulsion to always measure up to a specific type of ideal. Until you understand why you do it, you’ll have difficulty stopping the behavior.

Healthy competition is okay – it can drive success and inspire excellence. But your children should understand that the only person anyone should really compete with is themselves. Working on becoming better and improving oneself – without the window dressing of things money can buy – will always be more fulfilling than measuring your success against that of another individual.

couple money argument

7. Making Debt Too Comfortable

As a family, do you find yourselves guilty of any of the following behaviors?

  • Paying for things with a credit card that you can’t currently afford, from a new bike to a family vacation
  • Throwing out credit card statements before you ever open them
  • Having several high-balance credit cards open at one time
  • Utilizing credit as a method for purchasing items you should be saving for
  • Paying only the minimum balance on your credit cards
  • Using credit for daily purchases (such as groceries, gas, and school activities) because you don’t have the money in your account

If so, you might simply be too comfortable with debt. We know that debt is sometimes a necessary evil, particularly when it relates to an investment that increases your net worth (such as a mortgage or student loans). But when debt is simply part of your daily routine, it can make your children get a little too comfortable with buying on credit and accruing debt. That attitude can continue on through their adult years, setting them up for a lifetime of debt.

Changing the Habit
Debt should always make you feel a little uncomfortable. It creates a healthy respect for the contract that you enter into with your creditor, your responsibility to pay it back, and the way it can limit your financial freedom in the future. Let your kids see you paying back credit card bills and debt, even when it’s painful.

Also, be prepared to say no when your kids want something that, without credit, you can’t afford. Saving cash in a jar for a family cruise can have much more of an impact on your kids than simply charging the expense to your Visa. They see the effort that goes into saving, rather than the instant gratification of pulling out the plastic. It’s a lesson that will stay with them forever.

8. Equating Money With Happiness

Being upset and tense when the coffers are low can send the message that money is the only way to happiness. Remember that it’s possible to be happy even if you don’t live a Trump-level lifestyle.

I remember once planning to take our kids to the zoo when they were very young. As we loaded up the car for the long drive, my husband reminded me to check our bank account to make sure we had the funds to pay the $30-plus entrance fee for all of us. I did, and was horrified to learn that a few bills had come out of my account concurrently, leaving us completely broke until payday.

I was upset, and felt like an awful parent because we couldn’t take our kids on the excursion. After some discussion, we ended up taking them to a nearby beach, which was free. We had a great time, and I don’t think my kids would have had any more fun at the zoo.

It has been years since then, and though we’re no longer the broke new parents we once were, the lesson has always stayed with me: Money can’t buy happiness. I don’t know that we’re any happier with more financial stability today.

Changing the Habit
Remind yourself that your happiness as a family doesn’t relate to your bank account balance. While it’s obviously important to provide for your children’s basic needs, it’s also important to remember that money is not the only factor in a happy and fulfilling life. Sometimes you’re up, sometimes you’re down: It’s the people you share it with that make the most difference. Being okay with saying no or opting out of the summer vacation can help teach kids to make do and keep a good attitude no matter what.

Final Word

No parent is perfect, and you’re bound to make mistakes. But while you’re feeding, bathing, clothing, and sheltering your little ones, don’t forget that you have an opportunity to help shape their habits and attitudes for the future. Teaching solid money principles to your allowance-loving eight-year-old could translate to talking finances with your responsible college student, and eventually seeing your children teach the same habits to your grandchildren.

What other tips can you suggest to teach positive money habits to children?

Jacqueline Curtis
Jacqueline Curtis is an experienced style expert, and she focuses on getting high fashion on a tight budget. She writes for several online publications, including her own fashion blog, How Not to Dress Like a Mom, and specializes in fashion, finance, health and fitness, and parenting. Jae grew up in Toronto, Canada, but now resides in Utah with her husband, two kids, and prized shoe collection.

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  • http://www.consumerhelpcentral.com Jay Fleischman

    There’s a difference between being open about budgeting and exposing your children to money issues at too early of an age. Kids shouldn’t have to bear the burden of a difficult financial position when they’re too young; rather, they should be given the freedom to be children. Start talking about budgeting and money when they’re teens, but do so without making them feel responsible for the household.

  • http://www.topbusinessaccountingsoftware.com Kate

    I agree with Jay, too much too soon can be a problem. But once they’re mature enough being part of the budgeting process can be very rewarding and educational. I learned a great deal from my mother regarding managing a household budget. I was way ahead of the game when I left home because of it.

  • AaronRichards14

    I must agree with at least one of the comments. Having been raised with an allowance for doing a full week’s worth of chores that I was allowed to do on whichever days I wanted (as long as they all got done by the end of the week) it helped me to realize what money was worth rather early. If I spent it all, I had nothing for the things that did matter. But I also must agree with the large portion of this article that speaks to needs versus wants as well as a great many other great tips. It couldn’t come at a better time either, when our children are being raised in a society rife with the entitlement generation. Glad to see something like this, and it certainly hits close to home.

  • CentsToMe

    Great tips. As a new parent, some of these are hard to avoid.

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