4 Big Mistakes we make when it comes to teaching our kids about finance

A friend of mine sent this blog post to me from Mint, a blog about money, the other day and I thought it gives some great advice on mistakes many of make when it comes to teaching our kids about money.

If you are a parent, you’ll undoubtedly love your child and want the very best for them. You would want them to have a wonderful childhood, and shield them from all the potential harms in the world — unfortunately, sometimes parents may accidentally shield their child from important life lessons too.

Here are four big mistakes we may make with our kids when it comes to finances. Not a parent? Take notes anyway so you can boss your relatives’ kids around.

1. Money? What’s that?

One of the biggest mistake a parent could make is to avoid the subject of money to their children. They may avoid talking about it to their child completely, or neglect to answer a child’s question regarding money.

“How much do you make?” — “How much does that cost?” — “Where does money go and where does it come from?”

If your child has ever asked any of these questions, it would be the perfect opportunity to expose them to the values and concepts of money. If you brush your child’s question off for whatever reason, you are neglecting the very opportunity to open a dialog about money!

If your child ask how much you make, you can use this as a chance to explain the family’s income and budget to your child. Write down an estimate of how much you make, how much is taken away by tax, and how much is left. With this, you can give your child a glimpse of the workings of money, why your family may have a certain budget, and where the money goes when it’s being spent.

Even if your child is too young to understand completely, you are at the very least imparting some financial knowledge onto your child — plus, you are teaching them while they care! Imagine trying to teach your children about money values while they’re in their rebellious teenage years!

So if your child is curious about money, talk to them about it. Avoiding the conversation while they’re young will make the conversations that much more difficult and awkward when the time comes to discuss about money.

2. Okay, okay. You can have it. Just this once though!

Whether it be giving your kids what other kids have, or giving them what they want simply because they want it, every parent has most likely done it at least once, or twice (or a few hundred times) — giving a handout to their kid, or giving in to their kid’s demands.

It is understandably a tough situation; you want to provide the very best for your child, because every parent would want their child to have better opportunities or a better life than what the parents themselves had. The problem begins when you give too much and your child may develop a sense of entitlement.

We all know what happens if we try to keep up with the Joneses. What will happen if our children tries to keep up with other children?

So before you buy something for your child, ask these questions to yourself (and maybe even to your child): Why am I buying this for my kid? Will it help them in their school work? Will it teach them skills they need? Will it enrich their life culturally? Or will my kid grab this and run off to show it to their friends?

Certainly, your kids deserve nice things. But if you’re not careful with your balance, besides the sense of entitlement, your kids may not develop the ability to delay satisfaction. Worse, if you give too much to your child, they may disassociate themselves from the true cost of things.

3. Oh, let’s just help Johnny out this time.

Saving your child from financial blunder may be in every parent’s impulsive nature, but before you come flying in to rescue your child from their financial mishap, consider the consequences carefully!

Did your child accidentally spent all their allowance for the week on candy and toys? Well, resist the urge to give them more money. Let them understand the consequences of unplanned spending or bad purchasing decision. Consider this, what would be better: Your 10 year-old child impulsively purchased a crummy $20 toy car, or your 21 year-old child impulsively bought a crummy $20,000 car? Letting your child make financial mistakes will enable them to learn from their mistake.

If you aren’t careful with how you help your child financially, you may find yourselves becoming the Bank of Mom and Dad. The last thing any parent would want is for their adult child to call them in the middle of the night, asking to borrow money because of the child’s reckless spending.

When you do help your child financially, plan it out ahead of time. Give meaning and purpose to the help, and make due sure your child understand why you wish to help them and the extend of your financial help. A great example would be helping your child pay for their higher education. Open a dialog with your child and discuss with them how you’ll be able to help them out financially. This way, your child knows what to expect, and understands how far your financial help may go.

4. Mommy and daddy can do this… because we just can.

Not being consistent in your financial teaching will definitely impact your child’s negatively. If you tell your kids they can’t buy a certain thing, but instead splurge on something yourself — you may be sending a mix signal to your child. In order to teach your child a sound financial lifestyle, you would have to be a role model and live a sound financial lifestyle yourself.

Keeping your teaching consistent is an important key in reinforcing certain ideas to your children, especially while they’re young. When you send your kids mix signals, they will easily dismiss previous financial lessons from you. After all, if mommy and daddy can do it, why can’t I?

If you are ever in a situation where you do something different than the values you’ve been imposing on your child, explain to them clearly why your actions may be different. Even if your child doesn’t understand your reasoning fully, you would at least impart on your child the sense that there is a reasoning behind the action.

Money Mistakes With Our Child Check List

1. The discussion of money is non-existence.
2. Avoiding teaching opportunities on money.
3. Giving to the child without a balance.
4. Not letting the child learn from their financial mistakes.
5. Helping a child financially without a mutual understanding with the child.
6. Not being consisten in the teachings.
7. Giving mix signals or creating double standards.
8. (Back to #1) Avoiding a dialog for any of the situations above.

If there’s one thing you’ll notice from the four mistake above is that there is a common solution to all of them — open a dialog and communicate with your child.

When you discuss with your child money subject, you not only impart knowledge to your child, but you are also giving your child a chance to voice their concerns or questions. The real gem in all of this is that, even if the financial discussion doesn’t go well, you are still giving your child your time and love — and at the end, that is what’s truly important.

Till next time - Earn Smart. Spend Smart.

Dave
www.payjr.com
www.Buxx.com