As a parent, protecting and providing for your child is a top priority. In addition to caring for your child’s daily needs, you’ve probably spent countless hours thinking about how to save for your child’s future. But given all that you’ve done, you might be surprised to learn that you could be dooming your child’s financial future.
Here are 10 ways you are sabotaging your child’s future finances.
1. Not Talking About Money
Children who don’t have conversations about money at home are less likely to understand the value of a dollar, and many of them grow up uncertain about how to manage money, according to T. Rowe Price’s 2015 Parents, Kids & Money Survey.
Financial experts agree that not talking to your children about money is one of the worst parenting mistakes you can make. Even if talking about the family’s finances makes you uneasy, you should still make an effort to teach basic personal finance skills. If you avoid the topic, you could be neglecting your children of essential life skills that will help them avoid debt and low credit scores.
2. Being a Poor Example
Good financial habits start with good financial modeling by parents, said Sean Moore, a certified financial planner and founder of SMART College Funding. Most parents know they should be good financial role models, but many aren’t.
Some parents still have poor money habits and troubled finances, and their children pick up on them. Nearly one in five parents in a Bank of America-USA Today report admitted they don’t follow the advice they give their kids. Meanwhile, nearly three in five kids said their parents’ advice and the example they set most influenced how they handle their finances today.
3. Hiding Your Arguments Over Money
Adults have a tendency to shield their children from arguments, but arguing about money in front of your kids can be beneficial. Children who witness their parents’ financial disputes are more likely to feel smart about money and more confident about what their parents taught them, according to research from T. Rowe Price.
When people argue, they usually dissect each other’s views and exchange a lot of details to support or oppose their claims. All that discussion provides a lot of food for thought, which is likely one reason why most kids who witness money disputes think their parents are good financial teachers.
Besides, your children need to know financial disputes occur in healthy, loving relationships. Too many people grow up with unrealistic ideas that people who love each other shouldn’t fight over money, and they often neglect issues that give root to bigger problems.
4. Using Cards Instead of Cash
Many children rarely, if ever, see their parents use cash. Cards are faster and more convenient, but shunning cash isn’t a good idea when you’re raising kids, especially when they’re not up to speed about what you’re doing.
Most teens don’t even know the difference between credit cards and debit cards, so they’re generally not going to know whether you’re using your own money or credit. All they know is plastic makes things happen — and that it looks so easy — which is a dangerous mentality to foster.
When your children go to college, they’ll start getting access to credit. In many cases, credit companies don’t wait for young adults to come asking for credit — they the offer. And when credit cards come rolling in, it’s a launchpad for financial problems.
College students are particularly vulnerable to consumerism. They get gratification from material things and use materials to establish self-worth and get acceptance from their peers, which tends to involve unreasonable spending habits, according to a study by Salve Regina University. And if you made plastic seem like a lifeline, chances are that’s how your kids will use it, too.
5. Not Clarifying Wants Vs. Needs
Part of your child’s problems with consumerism could be your fault. Say, for instance, you have a major presentation coming up. You’re explaining how the bigwigs from corporate will be there and if all goes well you’re going to get a promotion. You might say, “It’s important that I make a good impression. I need to get a new suit for this presentation.”
The comment might seem harmless, but it’s not. For starters, you haven’t identified anything that’s going to help you succeed at your presentation except a new suit. Never mind skills and hard work. Your child just gets the message that if you buy nice things, you’ll impress people and get what you want.
Furthermore, trying to impress executives might be a valid reason to want a new suit, but it certainly doesn’t make it a need. You’ve blurred the lines, and it has probably happened more often than you realize. Yet, you probably expect your children to understand that most of the items they ask for aren’t needs, which is counterintuitive.
6. Not Using College Planning to Teach Lessons
College planning is an ideal opportunity to teach children how to look down the road and plot their course, but a lot of parents fall short.
Parents are often hung up on who should pay for college — the parents or the kids — and that’s a good point to start laying out long-term financial planning for your child, according to Brent Lindell, CFP at Savant Capital. In fact, your children should understand that you can only help with college costs if you can afford to save for your retirement, too. This will emphasize to your children the value in saving for retirement.
Children should also be asked to take college tuition costs into account when choosing a university. Attending an elite private university, for example, might not be worth the investment if your child wants to pursue teaching jobs that will never pay more than $70,000 or $80,000 a year — the math just doesn’t work, said Lindell. Children need to think of college not only as a growing experience but an investment.
7. Not Providing an Allowance
Parents often dole out cash on an as-needed basis. Today, it’s money for the mall. Tomorrow, it’s for the movies. Nearly everything a child learns from these arrangements is negative.
They do not learn to budget or save up for things they want. They learn to get things at the whim of someone else and they learn to scheme to figure out when mommy is in a good mood, which is bad, said Lori Atwood, a registered financial consultant that manages Fearless Finance.
Children should receive an allowance. Managing money at a young age helps children develop decision-making skills and makes them more confident about managing finances as an adult. And since an allowance becomes a learning process, you shouldn’t micromanage your children’s money or come to the rescue when they’re short on cash for something they want.
8. Supporting Adult Children
Wealthier families often function on unsustainable levels of dependence. The whole family relies on one successful person, and eventually the arrangement comes crashing down like a pyramid scheme.
Bill Engel, senior vice president at Fort Pitt Capital Group, warned against providing too much financial support for your children. Doing so can leave them unprepared to change their lifestyle when money gets tight.
In short, you have to know when to cut off your kids so they can learn financial independence. “Parents are often worried about providing, but there’s a lot risk in providing too much for your kids,” Engel said.
9. Being Negative About Money
When it comes to money, don’t make yourself out as the victim of circumstances. When you make life seem plagued with problems that are beyond your control, you run the risk of raising children with self-defeating attitudes.
Confidence is an important part of a sound financial mentality. Instead of teaching your children to blame and complain, teach them to set goals and solve problems. When you’re faced with the challenge of how to save money for your child’s future on a tight budget, for example, sit down with your child and ask for their help in mapping out solutions.
10. Providing Easy Access to the Family Business
Family businesses are also commonly the source of financial problems. If you employ your own children, you have to hold them to the same standards as other employees — but that’s not usually what happens.
Instead of children getting positions that match their skills, in many cases they either get full reign of the company or high-ranking positions that give them the power to inadvertently hurt the business.