According to a new survey from ING Direct, one in three parents are more prepared to talk to their kids about drugs, alcohol, or sex and dating than they are to talk with them about money.
But that’s because parents definitely don’t receive training on how to do that teaching—in much the same way most people never receive an education on how to deal with their own finances.
As a result, moms and dads usually approach the subject via trial and error. We spoke to Tom Henske, CFP and partner at Lenox Advisors, Inc., to learn the most common mistakes parents make when they try to teach their kids about money—and how you can sidestep them.
1. Paying for Everything
Once your kid is old enough to get an allowance (around age six), ask her to pay for things she wants that you deem luxuries. This will force her to distinguish between her needs and wants, since her own money is on the line. For example, if she really wants an overpriced jacket, you might ask her to pay the difference between the cost of a regular jacket and the price of the one she likes, so she’ll appreciate what the purchase is actually worth.
Check out what an ideal family budget might look like here.
2. Saying Too Little
Don’t keep your older kids out of the loop when it comes to family conversations about money. By the age of 12, a child is old enough to weigh in on certain financial decisions and will appreciate the responsibility you entrust him with. For example, when planning the logistics of a family vacation, include him by saying, “If we pick this hotel, we’ll get breakfast free. If we pick the other, we could save because we’ll be closer to the amusement park.” Teaching him that spending is a choice will help him make smarter decisions on his own down the line.
3. Saying Too Much
Although it’s important to be open with your kids when it comes to money, don’t go overboard. For example, telling a child how expensive your divorce was or how much you’re paying in child support can make him feel bad even if that wasn’t your intention. Sensitive family issues aside, it goes without saying that you should temper everything you say; giving the impression that you’re struggling to feed the family can instill a deep fear of money instead of cultivating a responsible adult.
4. Attaching Strings
When you’re thinking about buying something for your child, either do it or don’t … but don’t attach strings to the purchase. This means that if you’ve decided to buy your daughter her dream bike, reminding her again and again that you bought it (or making her feel guilty once you have) isn’t a good idea. You should expect her to say thank you, but don’t give the impression that she owes you anything in return, unless you’ve set those expectations from the beginning.
5. Giving Allowance for Chores
The point of giving your child an allowance is to teach him how to budget and save his money—it should never be used as a bribe to get him to do chores he’s expected to do regardless. This also means you shouldn’t withhold allowance to punish bad behavior: Find some other way to get him to complete his chores (read this for ideas).
Money Tips from Moms
Chat with other moms about how they teach their kids about finances, and what topics they cover at what age.DISCUSS
6. Being Your Child’s Only Employer
Once a child is around 14, she can officially log some hours in the real workforce—but you don’t have to wait until that age to get her started. When you feel your kid is responsible enough (usually around 13 or 14), you can force her out of her comfort zone by encouraging her to do the odd jobs she would normally do for you—say, mowing the lawn or babysitting—for a neighbor or family friend instead. That way, she’ll learn how to deal with a “boss” who’s not just mom or dad.
7. Handing Over Money at the Wrong Time
Teens and pre-teens love nothing more than shopping—especially if they have the money to part with. But there is a way to help kids resist temptation, and it’s called steering clear of the typical Friday payday. In other words, give a kid his allowance on a Friday, and there’s a good chance he’ll blow it all over the weekend. Instead, try handing it over on Sunday to help him exercise restraint. Of course, if he does run out of money before the next allowance day comes, don’t bail him out—unless you want to make a habit of it.
For a list of financial milestones to cover at each age, read this.
What else do you do to help your kids learn responsibility?