Managing money can be challenging for many adults. But what many parents don't realize is that the choices they make have a huge impact on their kids' relationship with money. That’s why it is helpful to be aware of some harmful financial habits you may be teaching your children.
According to a 2017 study by T. Rowe Price, parents with poor money management skills passed on the habits to their kids without even knowing. And this is why.
Children observe and absorb everything. And how you manage and talk about money is no exception.
For this reason, it's important to know harmful financial habits you may be showing to your kids that could adversely affect how they will value and manage their finances in the future.
Talking About Money Is Bad
There's a misconception out there that money is a taboo topic. This is common in families struggling financially because they feel ashamed or parents don't want to worry their kids.
But this is a costly mistake, and one of the most common harmful financial habits. If you don't involve your kids when you're having tough times, you're teaching them not to talk about their finances. You lose the opportunity to teach them valuable lessons.
So face your fears and talk about money with your kids. Start with the basics, like why you're spending on food instead of takeout. Make them understand that talking about money is not something to be ashamed of.
Money Is Always Available
From an early age, show your kids that money doesn't grow on trees. Help them understand that people make money from work.
Start with simple things like chores to help them connect that when they work they'll earn. This will help your kids make wise decisions when asking for items or buying things instead of falling for instant gratification.
Apart from helping your kids learn to work to earn, chores like taking out the trash or cleaning family cars also prepare your kids to be responsible adults.
Financial Literacy Is Only For Grown-Ups
In addition to showing your kids that money is always available, many parents don't allow their kids to gain experience managing money. And as a result, kids tend to assume financial literacy is only reserved for adults.
Many financial experts say there are countless ways for kids of all ages to learn and practice managing finances. They further warn that parents who wait for their kids to grow up to let them gain these experiences are more likely to fail.
Kids can learn about income and expenses, marketing, profits, loss, inventory, and the value of their time from starting a small business. It doesn't have to be big. Income-generating activities like mowing neighbor's lawns, finding lost golf balls, cleaning and selling products online provide hands-on experiences that are fun for kids to learn.
Finding Cheaper Alternatives Isn't Worth The Time And Effort
When buying something, chances are there are many ways to get it at a lower price. But many parents don't take the time to check them out. And they're missing a great opportunity to teach their kids about being smart when shopping.
For example, encourage your kids to use comparison shops to get more affordable deals. Guide them to be bold enough to shop at a local store for gifts or clothes if they offer competitive prices. But don't stop there.
Encourage your kids to look for discount codes or coupons online. Make shopping fun by having them look for cheaper alternatives using apps. And if they earn reward points, let them redeem gift cards for something they want.
Your Financial Situation Is Permanent
As mentioned earlier, families struggling financially tend to feel ashamed of their situation. Many will often talk about things they can't afford instead of focusing on how they can afford them.
This may make kids feel like they're stuck in that financial situation and there is nothing they can do about it. But that's not true.
So help your kids know that financial situations are not permanent or fixed. Show them that there are many ways to break the rut and increase their income like starting a side hustle.
As you can see, parents can teach their kids harmful financial habits without even knowing. We hope this post helps you become more aware of the harmful messages you may be showing your kids about money. And more importantly, we hope you raise your kids to become responsible and independent financially. Good luck!