20 Ways NOT to Teach Your Kids about Money

kids money

There’s a lot of talk about how parents can prepare their kids for financial independence, but it’s just as important to point out ways that parents can unknowingly hurt their children’s financial success. If you haven’t started teaching your kids about how to be financially responsible, now is the time to begin. It’s never too early or too late to brush up on the best ways NOT to teach your kids about money (and how to avoid these unhelpful strategies). Here are 20 ways that you shouldn’t be teaching your kids about money and personal finance.

Celebrate Instant Gratification

Kids want things and they usually want them that instant. To make this perfectly clear, they will often throw a tantrum when they can’t get what they want that instant. Learning not to give into these tantrums and to explain to kids that it’s important to have the money when you buy something will go a long way to help their finances as they get older. This is especially true in an era of credit cards where it’s easy to purchase even when you don’t have the money. It’s important that kids learn and know the pleasure of delayed gratification, and having to earn some of the things that they want.

Give an Allowance without Making Kids Work

When kids are young, they often are thrilled when receiving allowance money. They can learn the importance of money by getting to handle and understand how it works at a young age. As kids get older, allowances are often given with conditions attached such as chores. The problem is that parents often times get lenient and let kids have their weekly allowance without checking to see if they’ve completed the work that they are supposed to do for the allowance. All this does is teach kids how to cheat the system and work as little as possible while still gaining the reward. This is not how it works in the real world and you do a disservice to your kids my not holding the accountable.

Negatively Lead by Example

The truth is that kids will watch you closely. The way that you handle money and your attitudes about money will be seen, studied and absorbed by your children whether you realize it or not. The way that you handle your money is the way you will lead your kids by example. That means that they are going to see the bad money habits you have and will assume these are the correct ways to handle money if you do not teach your kids otherwise. One of the most important things you can do to help your kids with learning about good money management is to possess good money management yourself. If you don’t have it, start learning now not only for yourself, but for your kids.

Assume Schools Will Teach Personal Finance

I’ve never understood why schools don’t emphasize money management as a core subject in schools. I think that every school should have a semester of “How to be a millionaire by 40” as part of their curriculum (what student wouldn’t pay attention in a class named that?), but the fact is that most schools teach very little when it comes to money management and how personal finances work. The good news is that you don’t have to be a financial expert to be a personal finance teacher to your kids. Simply showing how you manage your own expenses and what you’ve learned from the financial mistakes and triumphs you’ve made throughout your life is an excellent way to teach. Don’t be shy about passing this wisdom to your kids because chances are high that doing so will teach them more than they will ever learn about this topic in school.

Hide Your Finances from Your Kids

Many parents that are not proud of their current financial situation think that the best course of action is to hide their finances from their kids. The assumption is that if the kids don’t know about it, then they can’t make the same mistakes. The problem with this assumption is that the kids will see that you are hiding the finances from them and make a whole bunch of assumptions of why you are doing this with most of them probably being inaccurate. They will come to think that personal finances is somehow a bad thing. While certainly not easy, showing your kids your financial mistakes, and how they have consequences, can be one of the best teaching lessons that kids ever receive. If you want your kids to really learn about personal finances, have them be participants in both the financial good and bad that the family is going through.

Let Kids Learn Personal Finance Themselves

Perhaps you or someone close to you was once thrust out into the world with no support system — and they are stronger and smarter for it. But please don’t assume that shoving the baby bird from the nest is the right strategy when it comes to the importance of how to handle money. If you let your kids start from scratch without any guidance, they’re doomed to learn the finances the hard way with the likelihood that they will rack up a large amount of debt. Take the time to at the very least give them a solid financial foundation of knowledge that you wish you would have had so that they can make informed financial decisions when they are on their own.

Don’t Make Your Kid Get a Job

One of the best money lessons that you can give your kids is to make them get a job before they head out to college. It will instantly show them how much they have to work to earn even a little money and instantly dissolve that fantasy that money grows on tress. When kids don’t need a summer job to earn money because their parents pay for all their meals, clothes, gadgets and transportation, it’s easy for them to assume that earning money doesn’t take a lot of hard work. Encourage teens to find part-time work by promising there will be no more hand-outs for new party dresses, going to the movies with friends, or cell phone minutes. If they want these extras, they will need to learn their worth.

Let Kids Believe They Deserve Everything

You probably didn’t know that treating your kids to their favorite things was part of teaching finances, did you? Well, it’s true that even the youngest members of your family learn how money works through their parents’ actions. If “ask and you shall receive” seems to be one of your parental commandments, they will pick up on this and start assuming that’s how buying things works. Much like instant gratification, it’s important to let kids know that they need to make choices about what they want to spend their money on and that its not going to be everything.

Fail To Teach Compound Interest

This is a memorable and influential financial concept because it appeals to kids who dream about being rich grown-ups, but it’s also a practical lesson. It not only teaches kids that there are rewards to saving money for later, and it also involves a test in the virtue of patience. It also so how interest on money borrowed can make things a lot more expensive than the price marked on it. Don’t let this extremely important lesson slip through the cracks.

Let Kids Disrespect Items without Repercussions

The easiest way to remind your kids that money is not important is to let them get away with disrespecting their stuff. It’s far better to teach them that leaving a new toy in pieces after one use is not the way to treat something that took time and money to buy. You also don’t want them to think that once something breaks or gets boring it automatically goes in the trash to make way for a replacement. Kids need to learn that if they want to justify spending money on things they like, they will need to care for those items and appreciate the fact that they are able to afford them.

Never Be Hard on Your Kids

It’s difficult to be the parent that says, “You’ll thank me later” in the face of a teen who’s begging for cash or asking for an exception to the “earn it yourself” rule. The fact is that being the bad guy teaches them that not everyone will be so considerate of their desires in adulthood. Later in life they will not be able to beg Mommy to give them a job or ask Daddy to make their debts disappear. If you give them the occasional rough reminder that they need patience and continued responsibility to keep getting what they want, they will carry this lesson for life.

Let Kids Use without Paying

Finally being able to drive, have a cell phone, and stay out late are special milestones for teens. What is important for them to learn is that with participating in adult activities comes certain obligations. Kids should learn that borrowing the car is about more than just bringing it back in one piece. They need to pay for the gas they use by topping off the tank before they return home. Perhaps parents should also require chores or money in exchange for using the family cell phone plan. It’s important that kids realize that things do not just appear freely to use without any cost.

Fail To Teach How Credit Cards Work

Just because you don’t think your child is ready for a credit card doesn’t mean he or she isn’t ready to learn good habits and the facts behind credit card use. You’d be surprised how many teens and college students don’t understand how paying for something on credit works. Worse, they might actually believe it’s better to owe merely a minimum monthly payment instead of the whole amount of their purchase. If you teach them early that credit cards are powerful tools that have both advantages and disadvantages depending on how they are used, they will understand the needed restraint that comes with being a credit cardholder.

Let Kids Spend Everything They Earn

When kids first start working or earning an allowance, they might only make enough money to see a few movies, buy a couple of video games, or purchase a pizza dinners with their friends. While it’s fine to let them enjoy the few hard-earned dollars they do make, they also shouldn’t think that everything they earn should immediately be spent. Even kids making minimum wage should be taught the importance of putting money away for a rainy day, even if it’s just a few dollars at a time.

Never Explain the Difference Between Wants and Needs

One of the most important lessons that anybody can learn, whether that be adult or child, is the difference between wants and needs. If you act like every single thing in the world is something that is essential, your kids are going to get the same impression. By distinguishing between what our real needs and what are just merely wants, you set the foundation for your kids to make good financial decisions by being able to distinguish between the two when spending their money.

Make Talking about Money a Taboo Subject

It amazes me that so many families view conversations about money as taboo as conversations about sex. The reality is that both subjects should be able to be discussed freely among family members so that the kids aren’t misinformed about these important topics. You do no service to your kids by making money and finances a subject that should not be talked about at the house. The more open you are about money, the way it works, and the daily decisions that have to be made about it, the more comfortable your kids will be when it comes time for them to create their own budgets.

Never Give Any Financial Responsibility

There seems to be some parents that want to shield their kids from all their money problems. Since they have money responsibilities that they don’t enjoy, they feel that they are doing their kids a favor by not having them have any money responsibilities. This is a terrible assumption. It’s vitally important for kids to begin to develop money responsibilities and learn from their mistakes. If they are not given any financial responsibility, when they go out into the real world on their own, they are going to be completely clueless. The result will be that they will make huge financial mistakes rather than minor ones they learned from when they were kids.

Teach That What Others Have Matters

If you want your kids to constantly be chasing after the Joneses throughout their life, instill in them that what others have matters. One of the most important lessons anyone of us can learn is what makes each of us happy, and it isn’t money or stuff. When you help children learn what they love to do, they then don’t have to fall into the trap of believing that buying and having certain things will create happiness.

Teach That Brands Matter

When it comes to getting the most from the money you earn, understanding value is important. That usually means not buying the cheapest or the most expensive of anything, but rather the item that gives the most bang for the money. When kids are taught that brand is more important than value of functionality, they get a warped sense of what is important when purchasing anything. They believe that they are the Joneses and need to have the best of everything even when it may not be in their budget. Brands are not necessarily bad things, but to teach kids that is all that matters does them a great financial disservice.

Teach Being Rich Is Important

The impression that being rich is important is sometimes the unintended consequence that kids get from parents who are struggling with their own finances. This is especially true if these struggles cause continuous strife within the family. Kids begin to think that having a lot of money is important. While there is certainly nothing wrong with having a lot of money, it’s important that having the money is not the end goal. Money is simply a tool to help each person achieve their goals and should never be the goal itself. With all the commercialization that permeates the US culture, this is often easy to lose track of, but it’s one of the most important lessons about money that you can teach your kids.

Probably the most important realization to take away from this list is that actively taking steps to help your children learn about how money works and how to use it to benefit them the greatest is a set of skills that you as a parent need to teach your kids. If you default those lessons to someone else or try to hide them, the kids are likely going to end up being in far worse financial shape than if you were simply honest even about the money mistakes that have been made. Empower your kids to understand the basics of money and you will give them a gift that will serve them well their entire life.

(Photo courtesy of Brad_Chaffee)

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13 Responses to 20 Ways NOT to Teach Your Kids about Money

  1. Traciatim says:

    “Give an Allowance without Making Kids Work”

    I don’t agree. Chores should be done by all members of a household. Allowance should be a tool to tech money skills like saving for purchases, and concepts like “If you spend it, you don’t have it anymore”. I don’t think these two things should be linked in any way.

  2. Monkey Mama says:

    Agreed with the above. My dh and I both always had allowances and so do our kids. Now, when they turn 13 or so, they will earn their own money. But at 5 they can’t work, but they are already learning important money management skills. My kids are 6 & 8 and I frankly thank they have more financial sense than most adults these days. My 8yo has had 3+ years of allowance and money management practice.

    Anyway, I am always surprised by the reaction to the term “allowance” but I just think it is how it is approached. & for us, I think it may be the most important building block in teaching our kids, because that’s all they have for the first 8 years or so of learning the basics about money. So I Feel pretty strongly that an allowance is not a bad thing. But will I give me 16yo an allowance? Heck no! That is the distinction, I guess?

  3. trish says:

    I think that most parents teach much more by their actions than they believe they are and this includes how they handle money. Kids aren’t dumb and they can quickly see what is going on even when the parents don’t think they do. When you have poor financial habits yourself, the kids are going to learn these even if you tell them otherwise.

    The best thing you can do is have your own money in order so kids can see how they are supposed to handle it.

  4. John | Married (with Debt) says:

    Great rundown of what not to do. We are currently debating an allowance and your advice about chores and accountability is very helpful. Maybe teaching them to cheat the system is a good thing :)

  5. I am totally impressed with this list…great work. I’ve been teaching parents and teachers what TO do with their kids for years and it’s all been the positive aspects of what NOT to do here. Love it. Every parent should get this as a guide!

  6. Great comprehensive list. Parents have to make financial literacy a priority and not assume that the kids are learning and understanding basic money management techniques. We use a combination approach for handling allowance and chores. We give a very small weekly allowance, certain expected chores and optional larger jobs to earn more money.

  7. Brad Chaffee says:

    My 5 year old and I just had a conversation today about him wanting video games. We have been giving him a commission for 2 small jobs a week but he kind of dropped the ball and I didn’t say anything because he knew if he works he gets paid, if he didn’t work he doesn’t get paid. Trying to teach him about working hard and today the conversation I’ve been waiting for happened.

    He wanted a video game — actually he wanted 4 video games — and I wanted to buy him one but stayed strong. I told him one of the ways we are able to live in a house, eat food, and be warm as well as buy the toys we enjoy is by earning money for working.

    He said oh, and admitted he hadn’t been doing his 2 little jobs. Then I reminded him that he can start working again and when he does he will get a paycheck every two weeks. As a 5 year old he knows some of this stuff already but I think it’s pretty normal for a 5 year old to try and test the powers that be. LOL

    He said he would definitely start working again and I told him I would put up a chores “timecard” on the fridge for him to check off each night. He seemed excited. :)

    Great post!

    P.S. That happens to be a picture of my 2.5 year old when he was about 1.5 years old. haha! It’s always neat to see people use my images from flickr. 😀


  8. Eric says:

    I used to think that an allowance should not be tied to chores, but I have changed my mind. I want my children to understand that there aren’t any freebies out there; that they will have to work to earn money. I created a chore list for everyone. There are some that have to be done daily (homework, clothes, pets, etc.) and some that are done weekly (clean rooms, vacuuming, etc.). I also include items that can be done at any time by anybody. Every one of these things is assigned a dollar value and as things get done, they earn the corresponding money. I agree Traciatim that chores are the responsibility of the entire household, so I modified our chore/allowance list. The things they are expected to do on an daily or weekly basis HAVE to be done FIRST and earn the least amount of money. Once done, they get to take on bigger chores to earn bigger money. Also, instead of handing out money, I keep track on a chart of the money they’ve earned. If they want some of what they’ve earned, they ask me and I deduct it on the chart. Now, instead of “Can I have some money for XYZ”, I get asked “How much is XYZ and how much do I have in the ‘bank’.”

  9. Marcia says:

    I agree about the allowance and chores distinction. I got an allowance to help me learn how to save and spend money. When I got a paper route at around 15 and started babysitting at 16 the allowance stopped. Chores are to teach kids how to take responsibility and learn basic skills like making beds, doing laundry and dishes, and contributing their share to a household. In my opinion there’s nothing wrong with allowing a child to do extra chores or chores they wouldn’t ordinarily do to help them earn extra money for something they want. But I have met up with kids who think they shouldn’t have to lift a finger around the house unless they get paid for it. There’s a lot of work we do in life that we don’t get paid for but that has to be done regardless. So I don’t think that allowances and chores should be connected.

  10. Gail says:

    I never got an allowance and was doing chores by the time I was 5 at least. Somewhere I learned money handling skills and have taught them to my kids even though they also didn’t get allowances. I have heard some really bizarre (to Me) methods of determining how much an allowance should be and according to these lists, some kids would be getting more a month than I get as an adult in spending money for the month. These types of ‘rules’ seem to assume that every family has money to pass on for allowances and it just doesn’t and can’t happen in every family. But that doesn’t mean that kids can’t learn money handling skills at the same time.

  11. Sara says:

    I pinned this to pinterest. I hope you don’t mind my sharing it!

  12. poppy says:

    Thanks for this encouragment, i was searching as i was feeling bad that my 4 teen boys were being deprived a bit but to my amazement i pretty much ticked all the boxes of how i teach my boys and this is confirmed to me im not being mean but loving them and investing in their future by teaching this stuff now!My boys know how to shop haha they buy budget brands if cheaper than regular brands etc and are not even worried about labels!They know how to get bang out of their buck, i have been quite secretive about my own finaces so this was a new concept to me about being open!I have recently ask all four boys to write a list of their needs in order of what they need the most,my second youngest gave me his list here goes new underwear, a haircut,hair wax and some new tees was last as he has quite a few but some new ones would be nice, i was so impressed with his list! I dont give my boys an allowence but if they need money i give them xtra jobs not on the familys chore list which we all contribute to without pay as we all make the mess! one of my sons has a part time job after school twelve hours a week now and has already brought his computer within 7 weeks of working and has internet at last! I am glad i found this as know i will feel less guilt knowing im doing the right thing and that others are too and its not just me and the way my solo dad brought us up, he did say he taught us how to survive!

  13. Neha says:

    Today kids don’t understand the value of money. They just know how to spend money. I have a daughter of 9years. She always says for money and shopping. Your ideas are innovative. I will try all this.

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