The 7 Money Mistakes That Parents Make

parent's money mistakesWhen it comes to teaching your children about money, there is no single right way. There are, however, things you can do to guide them along a path and empower them to learn good financial habits. Below are 7 common mistakes that parents make when teaching good financial skills and habits to their children.

Money Mistake 1 – Pocket Money.
A danger with automatically giving pocket money is that it can create an entitlement mentality.

A young person having money of their own however is an important rite of passage and can form the basis of excellent financial education in budgeting, saving and spending.

One of my favourite money experts, Loral Langemeier is emphatic on the subject:
“NEVER PAY YOUR KIDS AN ALLOWANCE”
She argues that the best investment you can give your child is to teach them the value of entrepreneurship and the way that every economy in the world works. So instead of paying pocket money every week, design exercises and activities that are truly focused on basic finance.
Martin Lewis founder of Money Saving Expert is a fan of both pocket money and financial education – and he recommends encouraging children to work for their financial rewards, in order to embed a principle that will serve them well throughout life.

Money Mistake 2 – Not Talking About Money
Stay silent about money and you risk leaving your children open to the pitches of TV adverts and peer pressure.
Parents are the main source of money information for children, but 74% of parents are reluctant to discuss family finances with their kids, according to the 2014 T. Rowe Price Parents, Kids, and Money Survey.
Even if money is tight, don’t stress about it in silence.
When parents are worried about money but are not communicating their financial situation, children pick up on the anxiety and associate it broadly with finances. Rather than learning money lessons from their parent’s mistakes or situation, children instead learn that money is ‘stressful’ and ‘bad’.

Money Mistake 3 – Magical Credit Cards
Studies have shown that people spend 30% more when they use cards instead of cash. When you’re using plastic, it’s easier to ignore how much money you’re really burning through.
Credit cards not only wreak havoc on our budget, but also set a bad example for our children. Kids seeing cards being swiped and in the child’s eyes, you haven’t exchanged anything for your purchases.
Children need to understand that when we buy something, the money we’ve spent is actually gone. There are alternatives; using cash everyday instead will give your child a more realistic picture of how money works. Or when you spend using a card take some time to explain that that creates either a bill, which has to be paid, or is taking the money from your bank account as in the case of a debit card.

Money Mistake 4 – Setting a Bad Example
How can we expect our children to save money for the future when we don’t do it ourselves?
It’s very important that not only is saving a habit but a highly visible one.
This can include a savings jar prominent in the home, labelled with the holiday, event or purpose that it’s for. If your kids at whatever age see you putting your spare change in the jar on a regular basis they may get the bug and start saving themselves.

Money Mistake 5 – Saying Yes for an Easy Life
Many parents are actively teaching their kids about money – but their children are learning all the wrong lessons.
David Bach author of the Automatic Millionaire believes that the biggest mistakes that parents make is not saying ‘no’.
“I will go to someone’s home that is $30,000 in debt and their children have piles and piles of toys. This creates children who don’t know how to hear the word ‘no’ and they become adults who want instant gratification and live beyond their means. Plus, they miss crucial lessons like budgeting, prioritising desires and saving for something valuable”.
Never forget your great influence as a parent.

Money Mistake 6 – Not letting them fail
How often do we rescue our kids when they make a financial blunder? No-one wants to see their child fall down, literally or metaphorically but by always bailing them out we rob them of the chance to learn from their mistakes.
Fast forward to the teenage years and you may become accustomed to paying off mobile phone bills, covering car insurance or in one case I heard of re-mortgaging your home to pay off a child’s payday loan debts.

Money Mistake 7 – Mind your Language
Children make many requests every day. Parents will often deflect another purchase request by saying “I don’t have enough money on me” or “we can’t afford that”.
The language used to explain this to a child is very important.
An honest dialogue with positive language will get you positive results. Explaining why you’re not making the purchase gets kids thinking about prioritising their wants and teaches them to be more aware shoppers in general.
Rather than saying we can’t afford it try how can we afford it? This gets the young person thinking about ways in which they can take charge of the situation rather than being a victim of circumstance.

This article is an extract from Daniel Britton’s book The “7 Money Mistakes That Parents Make” an eBook version is available for a limited time free from the Personal Finance Academy website

THREE SIMPLE KEYS TO EMPOWER YOUR KIDS FINANCIALLY

by Elisabeth Donati, author of The Ultimate Allowance – Founder Creative Wealth Intl., LLC

Creator of Camp Millionaire & Creative Wealth for Women Workshops

You may be thinking to yourself, “Is there something I can do to make sure my kids don’t move home after they move out?” In other words, you want a way to make sure they grow up to be financially self-reliant. I’m here to say, ‘Yes, there are some relatively simple steps you can take to ensure that your kids leave home knowing what to do with that green stuff they will be in charge of making, managing and multiplying in the future.

More young adults are not only leaving college these days because of financial problems (student loan and credit card debt) but they are also moving back home after they graduate because they simply don’t make enough money to go it on their own.

The primary cause is simply that kids don’t have a clue what to do with their money, or anyone else’s for that matter. Most of them are very good at spending money, but it’s a rare 20-something that understands the dangers of credit card abuse or the power of saving and investing. Heck, for that matter, most adults don’t understand these concepts either.

Imagine this scenario…

Your son (or daughter) comes to you one day and says, “Mom, I have decided I really want to grow up and become a major league ball player.” You say, “Wow, that’s cool. Good for you.” And you go back to doing what you were doing. Your child looks at you and asks, “So, would you get me a ball so I can learn how to throw it?” You say, “Maybe later.” He says, “What about a glove and a bat?” You respond, “Nah, I don’t think so.” He’s a frustrated at this point and asks, “OK, but will you at least teach me the rules?” You say, “Oh, you can learn the rules later.” Now he is really angry; he’s fuming inside and feels stuck. Finally he gets really mad and yells, “But MOM, how am I ever going to become a great ball player if I don’t have a ball, bat or glove to practice with and I don’t know the rules?”         

This is what parents do, most unknowingly, to their children everyday in regard to money. We grow them into adults but rarely give them the equipment or rules to practice, and get good at, The Money Game!

Let’s look at three simple steps you can take to empower your children with the tools, knowledge and practice they need to grow up financially free.

FIRST, you must set the best example you can for your child. Since human beings learn best by example, it is critical that you first examine what you’re teaching your children through your actions because they really do speak louder than words. How can you expect your child to save and invest if you don’t? How can you expect your child to grow up with a healthy understanding of money if you don’t have a healthy understanding of money? How can you expect your children not to use credit cards if the only way they see you buy things is with a credit card?

The important thing to remember is that children learn from us three ways: by what they see us do, by what they hear us say and through the experiences they have with money. J know that they are always watching and learning from you in ways you probably aren’t even aware of.

If you’re like many adults who don’t understand money, you’re not alone.  You weren’t taught when you were young either, however, now’s the time to make a commitment to educate yourself. There are books and seminars everywhere. A great place to start is a program called the Millionaire Mind Intensive. For more information, visit http://www.peakpotentials.com/a/tofreedomandbeyond.

If you’re doing well financially, good job. Keep asking yourself how you might ‘show’ your kids about money with your daily routine and include your kid’s friends. Kids often learn better from people other than their parents so look for opportunities to influence all the kids in your circle.

SECONDLY, talk to your kids about money. Take every opportunity you can to open up a line of conversation about family expenses, credit cards, debt, interest, investing, business, real estate, the stock market, financial beliefs, etc. Some examples of when to talk to your kids about money are:

•   When you take money out of the ATM, talk about where the money comes from, why you can only take out so much, etc.

•   When you pay for the groceries with a credit card to get points so the whole family can go on vacation, make sure they understand the importance of paying the bill off EVERY SINGLE MONTH!

•   When you pay bills, let them help you write checks or pay the bills online. Teach them how to check the accuracy of each bill.

•   When you deposit money into your bank, visit your investment advisor or accountant, take your child along.

The worst thing you can do is assume that someone else is teaching your child about money. What children learn from parents who don’t talk about money is that talking about money isn’t OK. A healthier way to look at money is simply as a tool to reach your dreams (a Creative Wealth Principle); it doesn’t mean we’re better or thinner or smarter than others. It’s simply a tool.

THIRDLY, consider giving your child an allowance, but not the kind you may be thinking of. In my book, The Ultimate Allowance, I teach you how to take the money you already spend ON your child and run the money THROUGH them instead. I’ve read that it takes an average of $275,000 to raise a child through age 17. If you run even a portion of that money through your child, imagine the practice he or she is going to get. By making plenty of financial choices—good and bad— they learn the ins and outs of money management before the consequences aren’t so damaging.

In summary, remember that human beings learn best by example. Your children are watching everything you do with your money, listening to everything you say about money and internalizing all the experiences they are having with money, so pay attention to the example you are setting.

And finally, please talk to them about everything financial. It’s the best investment you can make in your child’s financial future and we promise it will ‘pay off’ in the end!

For more information on all of our unique financial literacy products and programs, please visit The Ultimate Allowance and Creative Wealth International or give us a call at 800-928-1932.

Financial Self Help for Kids

I never much cared for calling a book category ‘Self Help’, somehow Personal Development or Self Improvement sound much more appealing.

I was delighted to find out however that Dreams Can Come True is a finalist in the 2010 Best Book awards under the Children’s Mind Body & Spirit category.

The Financial Fairy Tales books have the aim of teaching children about money, both the principles and the practicalities. A large part of that is the mindset, values and beliefs surrounding possibility and prosperity, which underpin the action taking and achievement.

The award is a great honour for a first time author and hopefully will be a boost to promoting the books and the financial literacy message.

Read the full release here