4 Signs You Are Teaching Your Kids Bad Financial Habits

By Dan Rafter on 14 May 2015 0 comments

You spent that extra money in your bank account on a weekend trip to New York City, instead of using it to pay down your credit card debt. Maybe you even accidentally paid your power bill a week late last month.

Are you inadvertently teaching your teens bad financial habits?

You might be.

It's not easy measuring how influential parents are when it comes to influencing their children's behaviors. Just ask parents who've tried to change a teen's mind on anything from fashion to dating to finding a job. But a 2014 study by Bank of New York — New Rules for Engagement — found that 52% of Millennials ranked their parents as their most trusted source of financial advice, while just 10% trusted the money advice of their peers.

"Maybe children don't trust their parents when it comes to picking friends, music, spouses, or even careers, but when it comes to financial advice, parents come out on top," says Kendrick Wakeman, founder and chief executive officer of FinMason.

Because of this, parents have a special burden to pass good financial habits on to their kids. Wakeman says that ideally parents do this by example — they save money, pay their bills on time, and don't run up their credit cards. Their children see this and do the same things when they're adults.

But what if you are far from the perfect financial role model for your children? What if you often forget to make your car loan payment on time? What if the debt on your credit cards grows every month? Might you be passing bad financial habits onto your kids?

Here are four signs that you are passing bad money habits onto your teens, and what to do about it.

Can't You Just Use Your Credit Card?

You're in the department store shopping for a flat-screen TV. There are models within your budget, models that you've saved up enough to buy with cash. But there's an even better TV that's outside your budget — far outside it. Your teens want it. When you tell them it's too expensive, they ask "Can't you just put it on the credit card?"

This is a sure sign that your children have watched you use your credit cards to buy items that you can't really afford. It's time to act like an adult and only make credit card purchases that you know you can pay off in full once your bill comes due. You want to teach your teens how to use credit cards wisely; using them to buy items that you can't afford is not how to do this.

Let's Get One More Thing

You're at the grocery store with your teens. You've checked off every item on your shopping list. But as you get nearer to the cashier, your teens start tossing packs of gum, magazines, or candy bars into your cart.

The odds are good they've learned how to impulse shop from you. You don't want your teens to grow up to be impulse shoppers. Those extra Milky Way bars and bottles of Diet Pepsi add up. Resist the urge to add them to your cart at the last minute. And make sure to stop your teens from adding them, too.

Can't We Just Buy This One?

You've decided to buy a new laptop for the family to use. Your teens are thrilled with this idea. Your plan is to do some comparison shopping, either online or at local electronics stores. Your teens, though, just want to buy the first laptop they find online, regardless of its price or reviews.

Look back at your own behavior. How many times have you simply gone online and ordered a new washing machine after a 10-minute online search? Have you gone to a car lot and simply picked the first car shown to you by the salesperson? If your teens have observed this behavior, the odds are high that you've taught them that comparison shopping doesn't matter. You can reverse this lesson, though. Next time you need to buy a new dishwasher, refrigerator, or other large item, take your kids comparison shopping with you. They need to see just how much money you can save when you shop around.

Why Can't I Have It, Too?

Your daughter wants a new pair of expensive jeans because her friend at school has the same brand. Your son wants a new pair of gym shoes because his friend dropped $50 on the same pair.

It's likely that your teens have learned this why-can't-I-have-it-too behavior from you. Have you upgraded to a new car because your neighbor did the same? Have you purchased a swimming pool because you've seen your neighbors enjoying one? It's okay to buy these things, if you can afford them. Teach your kids self-control — and help them avoid neighbor envy — by only upgrading to a new car when you're financially ready, no matter what your neighbors have parked in their driveway.

You Don't Need a Big Bank Account to Teach Good Habits

Debbie Crowder, branch banking executive vice president at Richmond, Virginia-based SunTrust Bank, said that parents, even if they are struggling with their own finances, can teach their children how to avoid their mistakes and become financially savvy adults.

"Involve your child in in the day-to-day financial decisions you make for your household," Crowder says. "When the power bill is higher than usual, explain the reason why and discuss how the entire family can conserve energy the next month to lower the bill."

Chris Hogan, a financial speaker with Ramsey Personalities in Brentwood, Tennessee, says that parents can pass on good financial habits even if they themselves have a history of financial mistakes.

"The worst thing we can do as parents is to pretend like we're perfect," Hogan says. "It's important to talk about the mistakes we've made financially. That's what can make a real impact on our children's behavior."

How do you model good financial behaviors for your kids?

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