School’s out for the summer, but don’t think your children aren’t learning anything. When you take your kids to the theme park, the zoo, on vacation or even somewhere banal like the supermarket, money is always going to be part of the equation. In other words, you may be the only teacher they’ve got right now. That’s why the summer is always a fine time for parents to examine their financial behavior. Chances are, you’re instilling some great money habits on your kids. But you may be passing on some bad ones, too.
My idea, I pay. Their idea, they pay. Phil Reames, a financial planner in Kalamazoo, Michigan, has an interesting financial suggestion for parents that could pay dividends in your family. Whoever suggests buying something in the family pays for it. He calls it, “My idea, I pay. The kids’ idea, they pay.”
[See: How to Live on $13,000 a Year.]
This strategy really only works if your kids are getting an allowance, whether through chores or on their own, but the idea is pretty basic. For instance, Reames says that if he suggests going to see a movie, he’ll pay for it. But if his kids ask to see a movie, he’ll say, “Sure, grab your money.”
And it really helps in the supermarket aisle, Reames says.
“This totally eliminated any ‘Can I have this or that?’ in the stores,” he says. “If we were in line at the grocery store, and the kids said, ‘Hey Dad, can I have a candy bar?’ the answer was always the same whether it was me or my wife: ‘Sure you can. Did you bring your money?'”
Reames adds that doing this taught his children, who are now young adults, to always bring money with them on trips, to really contemplate whether a product or service was worth buying and to be prepared to pay for it.
Show your kids that you’re saving money. Even if you aren’t a great saver because you’re buried in bills, you can still talk up the importance of saving. You can also encourage your kid to get in the habit of saving allowance and birthday money. You’ll help your kid go further in life if you teach them about saving, says basically every financial expert who ever lived.
Byron Ellis, a certified financial planner with United Capital Financial Advisers in The Woodlands, Texas, says that when his daughter was very young, she had a bank with three separate compartments.
“One compartment looked like a bank and it was designed as a place for long-term saving; another was shaped like a store and was meant to be a place to pull money out for things she wanted to buy; and the third section resembled a church and was designed for money that she would give away to others,” Ellis says.
Whether your kid has a special bank or three shoeboxes, the point is the same — you can start teaching your kids about money as soon as they’re old enough to put cash in a container.
[See: 10 Things Teens Should Know About Money.]
Explain to your kids why you aren’t paying for certain things. Your kid wants a new smartphone. He wants expensive sneakers. She wants a doll that costs a hundred bucks. And you tell your kid you can’t afford it.
Not a great idea, says Elizabeth Odders-White, an associate professor of business in the Department of Finance, Investment and Banking at the Wisconsin School of Business.
“If your child says, ‘Let’s go to Disney World over spring break,’ and you actually could come up with money to pay for the trip, but it’s not a priority, saying, ‘We can’t afford it’ is not only a cop out, it’s also a missed opportunity to teach your kids about trade-offs,” she explains.
Odders-White, who has written money-themed parenting guides for the Consumer Financial Protection Bureau, says it would be better to be honest and say that you’re choosing to not spend money on going to Disney World, or that if you go, you won’t have the money for other important and fun things.
That said, if you find yourself uttering those immortal words, “We can’t afford it,” don’t beat yourself up. Odders-White, who has a 16- and 20-year-old, admits that she, too, used to fall into that trap with her two kids.
[See: 7 Habits You Can Learn From Highly Successful Savers.]
Stop with the impulse buying. A lot of experts will tell you that it isn’t a great idea for your kids to see you buying a lot of things without thinking about the financial consequences.
“If kids watch their parents make a big purchase like buying a new car on a whim, they won’t understand the value of a dollar. If your child is old enough, you can get them involved in the process of comparing prices and shopping for the best deal. That helps teach kids how to be responsible with money,” says Trent Dransfield, a life coach and owner of First Security Financial in Logan, Utah.
And with impulse buying, if they see you doing enough of it, that can lead to your kids becoming adults and making their own financial decisions without thinking it through. The next thing you know, you may be tempted to clean up their financial messes, which helps no one.
“I have seen clients who are still paying the cellphone bills of their 30-year-old children. … Paying these bills seems harmless, but it doesn’t teach these children responsibility, and it causes them to look to their parents to always be there to bail them out,” says Krista Cavalieri, a certified financial planner in Worthington, Ohio.
Reames agrees. “I can’t tell you how many times I’ve seen parents withdraw money from their retirement accounts, sometimes even paying penalties, to help pay off their kids’ $10,000 or $20,000 credit card debt to save their credit or some such excuse,” he says.
That’s scary to think of your future being a human ATM to your kids (OK, that may have already happened), but there’s a fairly easy fix, Dransfield says. Spend more time with your kids, instead of more money. Dransfield says he believes that parents and kids not hanging out together more can lead to financial problems for the children. Indeed, many parenting experts argue that the quantity of time spent together is just as important, if not more, than quality time.
“A child will learn by example,” Dransfield says. “If a parent isn’t spending time with their child, it’s difficult for a child to understand the standards a parent has set. This means kids aren’t learning what is right or wrong, both in finances and in life.”
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