4 wrong money messages for kids (and 4 right ones)
Freelance writer based in New Rochelle, N.Y.
When it comes to money management, your children are watching.
“Kids see and hear all kinds of things going on in their households,” says Robin Taub, an accountant and author of “A Parent’s Guide to Raising Money-Smart Kids.” “That extends to how their parents deal with money.”
A 2015 Bank of America/USA Today study found 58 percent of millennial respondents said their folks had the greatest impact on their money skills. Trouble is, many parents fall short in teaching their children the ins and outs of finance. Worse, through word or deed, they unwittingly model the wrong lessons, instilling in their offspring behavior that is often dysfunctional.
With that in mind, here are common ways parents teach their kids unhealthy money habits – and what you should do instead.
1. Making the topic of
Kids frequently see their folks buying stuff. But parents often don’t explain to their children what they’re buying and why. Perhaps because they're busy, or don’t trust their own financial management skills, mom and dad seem to keep the topic secret.
That conveys an unhealthy message. “They walk away with the lesson money is either not important, or so explosive you should never talk about it,” says Brad Klontz, a financial psychologist and co-founder of the Financial Psychology Institute.
What to do instead:
Take advantage of age-appropriate, teachable moments. “Make the world your classroom,” says Neale Godfrey, an expert in financial literacy for children, and founder of the Children’s Financial Network. Back when drivers paid highway tolls by tossing the correct change in a basket, she discovered her 3-year-old son thought the activity was a game. She seized the opportunity an explained the money went to maintain bridges and roads. It was a revelation.
Similarly, when you take money out of an ATM, don’t just stick it in your wallet. Explain where the cash comes from – your paycheck, which you deposit into a bank account – and perhaps even a little bit about how you make your living.
Another tactic is to show your kids the bills when they’re old enough to understand. To a middle schooler, says Godfrey, you can share an electricity statement. Explain that this bill is why you’re always asking to turn the lights off. You can even offer that, if they come up with a way to cut those expenses, you’ll split the savings 50-50.
On the other side of the coin: parents who reveal too much. That means sharing financial information – and responsibility – inappropriately. Klontz calls it “financial enmeshment.” He points to patients who, as children, had to answer phone calls from creditors. Because such behavior usually happens during times of stress, it fosters anxiety in children not old enough to understand the situation. Children “will begin to worry and stress about it, and that can leave long-term damage,” says Andrea Travillian, a financial coach in Dallas.
What to do instead:
Discuss money in a way that will not worry your kids. Don’t avoid bad news, just bring it up in a straightforward manner. Let them know you’ve been laid off, but do so in a positive way, emphasizing how the family will deal with the situation. “It’s better to give a name to a problem,” Klontz says. “Share the reality, but keep it under control.” Ask for their suggestsions and bring up actions they can take to help, so they feel less helpless.
You also have to take into account your child’s temperament and level of maturity. “It’s a case-by-case basis,” Travillian says. A worrywart, for example, will tend to be more traumatized by oversharing than a more easygoing kid. “You need to have conversations that won’t scare them to death,” says Theresa Harezlak, a financial adviser with Savant Capital Management in Rockford, Illinois.
3. Saying “yes” too often
It can be hard to put your foot down and refuse to buy things your kids want. But you’re not doing anyone any favors by giving in. “You’re failing to show kids the underlying mechanisms of saving and delaying gratification,” Klontz says.
What to do instead:
Teach your kids the connection between saving and spending.
Giving an allowance is one approach, but there are different philosophies. Some experts say kids should get an allowance only for doing chores, because they shouldn’t learn you can get something for doing nothing. Others recommend providing the money without strings. And still others advocate doing a little of both.
Jennifer Gae Hellum, a Pelham, New York, mother of two now-teenage boys, started giving her sons an allowance in elementary school. She required half of each payment go into a college savings account. They had to tap their allowances to pay for extras. When her son, Luke, was in fourth grade, he spent a year and a half saving up for an iPod. A year later, he started squirreling away money for an iPod Touch. When the boys lost something – say, a coat – they had to pay for a replacement themselves.
“If your child wants $125 shoes, you can explain that you choose not to spend your money that way,” Travillian says.
It’s all about teaching your kids that how and when you spend money involves choices and reflects your value system. The same approach applies to your own spending. Instead of buying something you like immediately, tell your kids you’re going to sleep on it. Then comparison shop with your children to find the best deal.
4. Fighting about money
in front of the kids
Money is at the root of many marital arguments, and it’s easy to lash out and forget that they children are within earshot. The result: “They’re going to pick up on your anxiety and learn that money is something you have to fight about,” Godfrey says. “Then the whole topic becomes poisoned.”
What to do instead:
Sure, couples have disagreements about money: It’s an inevitable part of most marriages. But it’s best to have those discussions when the kids aren’t around – period. Ditto for making cutting remarks, even if they don’t escalate into a full-scale battle.
A more-productive approach is to conduct money-related discussions in a workmanlike, collegial fashion – for example, sitting down with your spouse and going over your monthly budget without blowing a fuse. The reason: The kids will see you can communicate about such issues calmly. On a related note: Avoid drawing your kids into the middle of a disagreement. That means if you’re out shopping, there’s no, “Let’s buy this, but don’t tell your father.” Says Godfrey: “Otherwise, on top of everything else, you’re teaching your kids to lie.”
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