How To

Family Budget – The Four Terrible Money Mistakes We Make With Our Kids

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If you’re lucky enough to be a parent, no doubt you’ve already planned out the first eighteen years of your child’s life. True to your dreams, they should have all of the positive experiences they can soak up, with none of the pitfalls and traumas that are out there. Sound familiar? While those plans are admirable (and hey, who wouldn’t want their kid to avoid the lunch-money bully in second grade), be wary: Sometimes you can accidentally shield your child from important life lessons in the process.

Take this article to heart, then: We’ve put together four big mistakes we may make with our kids when it comes to finances. (New: Hint: Managing the family budget is one of them). Not a parent? Take notes anyway, so you know exactly what your not-so-favorite cousin is doing wrong with their son.

1. Money? What’s that?

One of the biggest mistakes a parent can make is to avoid the subject of money altogether. This ranges from the money-doesn’t-exist approach (avoiding the subject altogether), to the I-can’t-hear-you method (dodging direct questions from your kids when the subject comes up). It doesn’t matter. It all comes down to the same concept.

“How much do you make?” — “How much does that cost?” — “Where does money go and where does it come from?” Do these sound familiar? If your child has ever piped up with questions like these, seize them: they’re the perfect opportunity to expose them to the values and concepts of money. If you brush your child’s question off, you are neglecting the very opportunity to educate them when they’re expressing interest!

If your child asks how much you make, you can use this as a chance to explain the family budget and income to your child. Write down an estimate of how much you make, how much is taken away by tax, and how much is left. With this, you can give your child a glimpse of the workings of money, why your family may have a certain budget, and where the money goes when it’s being spent.

Even if your child is too young to understand completely, you are at the very least imparting some glimmer of financial knowledge onto your child — plus, you’re teaching them at the very moment when they want to learn! Imagine trying to teach your children about the same values when they’re 14 and stomping up to their room because you wouldn’t pay their $150 cell phone text bill. Hopefully, you can understand which path is easier.

Bottom line: If your child is curious about money, talk to them about it. Avoiding the conversation while they’re young will make the conversations that much more difficult and awkward when the time comes to cut the strings. Remember, it all starts with the home budget.

2. Okay, okay. You can have it. Just this once though!

Whether it be giving your kids what other kids have, or giving them what they want simply because they saw it in a commercial, every parent has most likely done it at least once, or twice (or a few hundred times) — giving a handout to their kid, or giving in to their kid’s demands.

It’s understandably a tough situation: You want to provide the very best for your child, because every parent would want their child to have better opportunities or a better life than what the parents themselves had. The problem begins when you give too much, and your child may develop a sense of entitlement as a result.

We all know what happens if we try to keep up with the Joneses. What will happen if our children try to keep up with other children?

So before you buy something for your child, ask these questions to yourself (and maybe even to your child): Why am I buying this for my kid? Will it help them in their school work? Will it teach them the skills they need? Will it enrich their life culturally? Or will my kid grab this and run off to show it to their friends, only to drop it for something else two days later?

Certainly, your kids deserve nice things. But if you’re not careful with your balance, besides the sense of entitlement, your kids may not develop the ability to delay satisfaction. Worse, if you give too much to your child, they may disassociate themselves from the true cost of things.

3. Oh, let’s just help Johnny out this time.

Saving your child from financial blunder may be in every parent’s impulsive nature; But before you come swooping in to rescue your child from their financial mishap, consider the consequences carefully!

Did your child accidentally spend all their allowance for the week on candy and toys? Resist the urge to give them more money just so they’ll make the same mistake. Let them understand the consequences of unplanned spending or bad purchase decisions. Consider this: Would it be better if your 10-year-old impulsively purchased a crummy $20 toy car, or if your 21-year-old child impulsively financed a crummy $20,000 car? Letting your child make financial mistakes will enable them to learn from those same hazards.

If you aren’t careful with how you help your child financially, you may find yourselves becoming the Bank of Mom and Dad. The last thing any parent would want is for their adult child to call them in the middle of the night, asking to borrow money because they blew $15,000 at the slots in Vegas. You have the power when they’re young to form the correct habits… and sometimes that can even mean letting go enough for them to learn, themselves.

When you do help your child financially, plan it out ahead of time. Give meaning and purpose to your aid, and make certain your child understands why you wish to help them — as well as the extent of that help. A great example is always helping your child pay for their higher education. Open a dialog with your child and discuss with them how you’ll be able to help them out financially. This way, your child knows what to expect, and understands how far your financial lifeline may stretch.

4. Mommy and daddy can do this… because we just can.

Not being consistent in your financial teaching impacts your child in a very negative way. If you tell your kids they can’t buy a pack of baseball cards, and then turn around to splurge on season tickets to the Giants for yourself — you may be sending a mixed signal to your child. In order to teach your child a sound financial lifestyle, you have to teach by being a living example and explaining about the home budget.

Keeping your teaching consistent is an important key in reinforcing certain ideas to your children, especially while they’re young. When you give out mixed signals, kids can easily dismiss previous financial lessons from you. After all, if mommy and daddy can do it, why can’t I?

If you’re ever in a situation where you do something different than the values you’ve been imposing on your child, explain to them clearly why your actions may be different. Even if your child doesn’t understand your reasoning fully, you’ll at least impart on your child the sense that there is a reason behind the action.

Money Mistakes with Our Child: A Check List

  1. Not discussing money entirely.
  2. Avoiding teaching opportunities when your child expresses interest.
  3. Giving to your child without a balance.
  4. Not letting your child learn from their financial mistakes.
  5. Helping your child financially without a mutual understanding about the situation.
  6. Not being consistent in what you teach.
  7. Giving mixed signals or creating double standards.
  8. (Back to #1:) Avoiding a dialog for any of the situations above.

If there’s one thing you’ll notice from the four mistakes above, it’s is that there is a common solution to all of them — open a dialog and communicate with your child.

When you discuss with your child money subject, you not only impart knowledge to your child, but you’re also giving them a chance to voice their concerns or questions. The real gem in all of this is that, even if the financial discussion doesn’t go well, you’re still giving your kid your time and love — and at the end, that is what’s truly important.