7 Mistakes Parents Make Teaching Kids About Money

Cheryl Lock

Money Mistakes To Avoid When Teaching KidsIf you’ve approached the topic of finances with your kids, you’re way ahead of the game.

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?

  • http://twitter.com/WealthyBizWoman Sandra Baptist

    Great tips! I’m trying to teach my 6 y/o good money habits.

    I also think kids should have their own bank account and their little piggy banks to save the pennies!


  • http://twitter.com/USMBlogger UltimateSmartMoney

    I think I already made plenty of mistakes when teaching about money to our kids.  This is great information which I plan to use your advice.

  • guest

    the government could take some serious lessons from this too— “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.”

    it’s so simple yet so against every legislation in recent past….

    • Robert Johnson

      I agrree we should use mistakes the government makes in giving more and more to those with the most 1% …and wage earners and poor get to hope that trickles on down to the rest of the 99%..its a failed policy thats been tested …resulting n created the 2nd worst economy in history .it was corporate welfare and greed for billionaires ..not the few bucks for stamps for starving kids

  • http://twitter.com/SavvyBroke Savvy&Broke.com

    My 9-yr old has a kiddy account with our bank, but I’ve found it difficult to teach him about “virtual money”…coins and dollars he gets. I’m excited to see how well he will catch on to the new digital monopoly board game I bought for Christmas. Turning the experience into a fun-filled family experience may make it easier to understand.

  • http://www.facebook.com/profile.php?id=798945250 Shantelle Vye

    I think giving a kid an allowance for no reason at all makes them spoiled brats. Most of the people I knew growing up who parents just gave them money now have financial issues, and really don’t seem to understand finances… most don’t even have a savings account! The ones who had to work for their allowance or didn’t receive one at all are pretty responsible about their finances and don’t buy things unless they can afford them.

    My parents never gave me an allowance, but if I did things on my own for the family that were more than my regular household responsibilities of dishes, laundry, cleaning, and cooking (like cleaning the car, fixing things in the house, or cleaning and reorganizing the refrigerator or cupboards),  they would give me a few dollars. They also paid me to babysit my sister when they both had to work.

    I think I turned out ok. I’m more responsible with my money than most people my age. I graduated from college with no debt. I don’t have a credit card. I save for the things I want, and pay for it up-front. When my boyfriend and I bought a TV for our house, it took us 7 month to save up the $300 to buy it… but that was our choice. Our paychecks are spent first on bills, then on household necessities, and whatever is left over we split between us, from which we each take a small percentage and put it into our [insert item we really want] fund. First it was the mattress fund, then the TV fund. Not sure what it is right now though, haha. :-)

    Half of my extra money (after my fund percentage is taken out) usually goes into my own savings account, which I have been maintaining myself since I was 10. The other half goes into my checking, so I have extra cash on me.

  • Michwake

    My son is 12 and we talk about money all the time.  We have since he was little.  He always wants what his friends have of course and I do make him save up for things.  He knows what needs are vs wants and even laughs when he said “food, clothing and shelter”:  :-)  He gets $20 a week on Mondays mostly for a food allowance but sometimes he is good about making something at home to eat and then saving the diffence.  I do give him the money to go to eat with his friends during the summer.  Otherwise, during the school year he takes his lunch and does not get this lunch money.  Year round there are chores and he gets a “paycheck” based on how much work he does.  This week he mowed 3 yards so it was a good week for him.  He really wants a special edition of a video game coming out so he is working really hard. 

    I’m also trying to tell him that 16 isn’t far away and if he wants a car he better start saving now.  I show him what I have set aside for college in his 529 plan.  I worked full time to put myself through college and I want to do what I can to make sure he is successful.

    I’m also a single mom with little help from my ex.  He can’t handle money at all (one of our issues).  It is all the more reason why I try to teach my son early.  So while he wants everything he has to prioritize what he wants most and work or save for it.  He doesn’t get everything he wants and that is ok.

  • Mrs. Reed

    My son is 16 years old and he got his first job this year.   He also works for my business.  I teach him constantly about the importance of savings and why.  I also give him an incentive….I match him dollar for dollar, up to $20 for making a biweekly deposit out of his paycheck.  Whenever he makes a deposit, it is his responsibility to retrieve a balance from the teller.  This is a good way of keeping track of what you have and not allowing someone else all that power.  We are in the process of purchasing his first vehicle and he has to pay a third of his car insurance.  (He wont know this, but, I will also save that for him) It will help him learn how to pay his bills.  This I believe is helping to raise a responsible child.   I dont pay him for things that he should be doing anyway like making his bed, cutting the grass, etc….(NO NO NO) If you do this, thats fine, but, not me.  I feel like this is your house too.  If he wants the most expensive shoes, he has to save for it.  I buy him what he needs and what he wants to a degree.  I think that he gets the picture because he is NEVER broke!  I like that!