The 9 Money Mistakes Parents Make With Their Kids

If you don’t know already, my husband and I have two daughters in their early teens. And though we’re not perfect parents (who is?) we’ve definitely gained some significant insights into how to talk to our kids about serious subjects. In particular, money.

Once again, I’m not a perfect mother, Amon’s not a perfect father, and we don’t expect you to be either! But we always try to do our best and to learn from our past mistakes. And that’s what I want to talk about today - mistakes.

I see a lot of mistakes in how parents talk to their children about money. So I’m going to dive into the biggest mistakes people make, so you can avoid them when talking to your own little ones.

1. Underestimating Their Financial Comprehension

Because so many of us didn’t learn about finances when we were younger, it’s hard to comprehend what exactly our kids can understand about the subject. Instead of patronizing them with the most basic financial topics, we should be challenging them. What you’ll often find is that they’re able to grasp much more of those topics than you expect.

2. Not Having The Conversation At All

Failing to talk about money with your kids in any way is a huge missed opportunity. Maybe it was normalized to not talk about money with your parents when you were growing up, but it's a tradition you should definitely change.

Having conversations about money in your household will give your kids the tools to start thinking about how money works and how they should handle it. It’s the perfect way to encourage your kids to work towards growing wealth as they get older.

3. Failing To Understand That Actions Always Speak Louder Than Words

You may talk the talk about saving and investing, but do you walk the walk? Your kids observe more of your actions than you think, and they know when you’re being hypocritical. Taking a “do as I say, not as I do” attitude with your kids will blow up in your face eventually.

Be consistent with your messages. If you’re teaching your children to be good with money, show them how to do that firsthand.

4. Only Talking About Money In Times of Stress

Let’s face it - most people only want to talk about money in times of crisis. I think this is a big mistake, and not the right time to introduce your kids to financial concepts. Instead, you should talk to them during more calm and peaceful periods.

That’s not to say you can only talk about positive things - you can talk about more negative things like budgeting and debts, etc. But you don’t want to make them stressed and uncomfortable, because this can warp your children's perspective and have them associate finances with inherent negativity.

5. Not Investing With/For Their Children

One of the first and most significant financial decisions we made for our daughters was opening custodial accounts for them. They sat next to us and watched while we opened them and even handpicked their own investments.

Opening custodial accounts and 529’s for college isn’t uncommon, but one mistake parents often make is not involving their kids in the process. It’s an excellent opportunity to develop their financial literacy further while helping them grow wealth at the same time.

6. Giving Them Too Much Allowance

When we were giving our daughters an allowance, we gave them just enough to buy the minimum that they wanted. But why, you ask?

Because that’s what happens in real life! Most people make just enough to get by, and if they want to buy more, they need to make more. So when we gave our kids a ‘bare-bones’ allowance it meant they had to figure out ways to get the big things that their allowance wouldn’t cover.

Giving your kids a big allowance means they aren’t incentivized to work any harder or find more creative ways to make extra cash, which are essential skills for building wealth in the future. This leads me to my next point…

7. Failing To Foster Money-Making Creativity

Kids have a lot of potential to come up with their own money-making ideas, even if they don’t make a lot of sense in the long run. Our daughters started so many money-making enterprises that put them in the red, but they also learned valuable lessons for every failure.

And no matter what, Amon and I were happy to pay for their short-lived businesses because it meant they were gaining knowledge, honing their skill as entrepreneurs, and using their creativity. And these are the things that help transition your children from living off an allowance to starting their own business. I believe we should all be encouraging our kid's financial creativity no matter what.

8. Not Teaching The The Connection Between Time and Money

Most children will look at the latest toys and gadgets that they desperately want, and not realize that someone is giving up significant amounts of time to earn the money to buy them.

When our daughters see something expensive that they think they want, I always ask - “how many hours do you think you would have to work to afford that?” And once they have the answer, we say: “do you think that’s a good trade?” This helps kids understand that buying expensive items is about more than just their money - it’s about how they spend their time too.

9. Not Talking About Debt

While debt isn’t an inherently negative thing, I do think that many parents fail to properly explain all of the pitfalls of debt to their children, particularly when it comes to student loans, credit cards, car loans, and home loans. The debt you acquire, as well as your credit score, can impose some considerable restrictions on your life, and it’s important that your children know that.

Maybe you’ve made some of the above mistakes, maybe you’ve made all of them, or maybe you haven’t had children yet. Whoever you are, don’t feel too bad - as I mentioned earlier, there’s no such thing as the perfect parent. But acknowledging these imperfections and trying to avoid them can make all the difference for your kids, and set them up for a brighter financial future.