Children and Money

Modeling Good Financial Behavior

Model Good Financial Behavior

Let’s get real: parents are human beings, so we make mistakes. Sometimes we accidentally say or do things we’d rather our kids not witness. Unfortunately, more often than not, they do. Our kids are always observing us, including how we manage our money.

Throughout my career as a financial advisor, I have sat across my desk from clients of varying wealth, and one common denominator was the role their parents played in how they viewed and handled their money.

Think about that for a moment—what are your memories of your parents and money?

Did they fight over it? Complain about their lack? Feel guilty for having too much or too little? Or say, “Don’t tell your Mom or Dad that I bought this.”

Perhaps, they instead told you money was a gift. They aligned their goals with how they used their money. And taught you how money works without judgement.

How are you following in their footsteps?

Good Financial Behavior 101

Fortunately, it is never too late to change your behavior. You have a wonderful opportunity to influence how your kids think about money. How you children view money may not seem important, but it is. Even if you teach your children how money works, they will still have a difficult time making smart money decisions if they lack emotional competence. How money makes them feel matters.

1. Set Goals.

This is critical. Your family goal should be something fun and achievable. It will supply you with a ready answer when your children get the “I wants”. But most importantly, you can show your kids how to align their money decisions with their goals. When you’re at the store, acknowledge things that catch your attention, but let your kids see you chose to honor your goals instead.

2. No Money Arguments.

I understand that you need to discuss financial matters with your spouse and sometimes those discussions can get contentious. I’m not suggesting you don’t have those conversations but have them when your children are not around. It’s stressful for kids to see their parents fight, and sometimes they misconstrue arguments into something more than a lively conversation. They equate money to stress and fighting.

3. Watch your language.

How do you talk about money in front of your kids? Pay attention. Don’t complain about lack, instead express gratitude for the things you do have. When you tell your kids “no”, please refrain from saying, “We can’t afford it.” It may be a true statement and you shouldn’t buy the item, but the words are scary, particularly to young kids who can be very literal. The better answer is, “I like that toy too. But remember we’re saving [insert your family goal] which is so important to me, and I can’t wait to [insert family goal] with you.”

Once you master these three steps, you’ll be a good financial role model, helping your kids view money in a positive light. Now they are ready for the next step: handling money. If you need help, my new downloadable workbooks provide five targeted lessons to help you raise Money Smart Kids.

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January 11, 2013  •  10 Comments  •  Children and Money

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  1. Friday, January 11th, 2013
    i agree with this post whole-heartedly... we make sure that your kids see that my wife and i are being collaborative in our dealings with money. we try to not to ever let it be a source of conflict. we are all in this together.
    • Friday, January 11th, 2013
      Thank you, Jefferson. You and your wife are definitely great financial role models to your children and us, too! Working together is the only way to succeed and a great lesson to teach your children.
  2. Friday, January 11th, 2013
    My memories of my parents and money are that money was rarely discussed in our house when we were kids. Both of may parents worked all the time (I was a latch key kid at 11). We lived in a small house and Dad would keep our cars in good condition so that he could drive them for 12 years. I never felt like there was a lack of funds, but we rarely traveled and certainly didn't live a lavish lifestyle. I never knew how much money either of them made and never heard them say they couldn't afford something. Because we were left so in the dark, I also never knew what a huge savings they were both building. My father is now in his mid 80s and is living quite nicely off of his investments. Looking back there were many opportunities for them to teach us more about good spending habits. Actually maybe they did by example and I just wasn't paying close enough attention.
    • Friday, January 11th, 2013
      It's a common scenario. Money is a taboo subject in most people's homes. It's fantastic that your father built such a nest egg, and I know you and your husband are working hard to doing the same for your family. Now that's definitely role model worthy!
  3. Friday, January 11th, 2013
    I agree with Sicorra: my parents rarely talked about money, and that's pretty sad, isn't it? What a wonderful opportunity to expose your kids to the world of investments, bills and you long as you control the conversation. Great piece.
    • Friday, January 11th, 2013
      Thank you! I'm so glad that parents are now talking openly with their children about money - and most importantly how to manage it responsibly. I believe money is gift when used in alignment with goals and values. Too often kids only see the spending side without understanding (hopefully) the thought that went behind money decisions. We have so much opportunity to teach our kids from both our mistakes and our victories.
  4. Wednesday, January 16th, 2013
    I am guilty of saying "we can't afford it" to my kids all the time. I just say that because they keep bugging me about something they want to buy. Your advice is great and I'll "try" to stop saying that.
    • Thursday, January 17th, 2013
      We are all guilty of "we can't afford it", so you are not alone! It's an easy answer, especially when the the kids are shouting, "I want" at everything they see in the store. :D But I do believe there is a better answer, which is why I stress having family goals. It's easy to accept "no" when you understand it is because you are choosing to honor your goal of a fun vacation, etc.
  5. Friday, February 8th, 2013
    My parents weren't the best role models as far as money (or anything else really) goes. They made a lot of it, but my dad would get mad at my mom for spending money, and my mom loved to spend money.

    Thankfully, after a few years of spending money like my mother, I learned how to save, how to be thrifty, frugal and intelligent with money. My wife and my thoughts about money are almost perfectly in line with each other. We can't wait to teach our children how to use money the right way!
    • Friday, February 8th, 2013
      I think most parents don't realize how much our children observe us and mimic our behavior. I'm glad you took back control and are handling your money, rather than letting it handle you. Your kids will learn a lot of great lessons from you!
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    "As a Certified Financial Planner, it is my passion to help individuals and families build a healthy relationship with money. I look forward to helping you raise financially confident kids.” - Shannon Ryan