Be a great money role model

6 tips to help parents avoid common money mistakes with kids and teens.

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Key takeaways

  • Anything that involves money, and the exchange of value, can be used as a learning tool.
  • Don't shield children from the cost of things. Use it as a teaching opportunity.
  • Teach children and teens the difference between wants and needs.

We know as parents that our kids are always watching us, even when we think they are trying to ignore us. That's their job.

We want to make sure that we are the best role models by teaching them the values and life skills they need to live happy and healthy lives. But it's not always easy.

Of course, we all make mistakes as parents. The great news is that we can look at our behavior and choose to change it. Here are some of the common mistakes many parents make with their kids around money—and some tips to avoid them.

Mistake #1: Believing that your kids must have what everyone else has

Whether you call it a temptation or a trap, many parents talk themselves into believing that their children should have what their friends or peers have.

Is this sense of entitlement and an expectation that they'll get everything they want a value we want our kids to have? This is not to say that your children can't have anything—it's all about balance. The main problem with the syndrome of "Keeping up the Joneses" is that there's no cutoff point.

A solution: Ask yourself: Why am I considering buying this for my children? Will it help them do better in school? Will it help them develop skills that they need? Do they understand the cost? There's nothing wrong with having nice things. But when children get things without realizing the amount of money they cost—and, therefore, the work required to earn them—there's a value disconnect that can start a cycle of wanting, and getting more and more without ever really being satisfied.

Mistake #2: Shielding your children from the cost of things

One of the ideas that parents may want to examine is the notion that you have to shield your children from the harsh realities of money.

A solution: Anything that involves money, and the exchange of value, can be used as a learning tool. Try not to make money conversations the biggest secret in the family. There's no way to expect kids to grow up with a healthy attitude toward money unless they know how it works.

For instance, when the bill comes at a restaurant, you could have your kids look at it and you could explain how to check if the math is correct and if all of the items were accounted for. Even discuss what the tax is and how to calculate it. You could also show your young ones how to compute a tip and why you leave one. Talk about the economics of being a waiter or waitress, and how the tip is a significant part of their income.

Shielding your children from the cost of things can keep them from getting a good start managing their money.

Mistake #3: Using credit cards when maybe you shouldn't

The biggest financial danger to teenagers is the credit card. It can be a more serious risk for those who suffer from the value disconnect discussed above. They have lost the connection between money and how hard it is to earn it.

When used responsibly, a credit card is an essential and valuable financial tool that can be instrumental in establishing a credit history and more. But when used when perhaps it shouldn't be, the message it sends to your teen is that you can buy things without worrying about paying for them.

A solution: Try to get yourself and your kids on a budget. Fidelity has tools that can help. You can start to teach them about the difference between wanting something and needing it. It's great to want things. But those things should fit into the budget, not derail it. In general, you're better off not using credit for something that can't be paid in full by the end of the month.

Mistake #4: Spending money on your children without thinking about it

Do your children constantly hit you up for $10 here and $20 there? Are they going back and forth between you and your partner? This drip, drip, drip of money can easily happen. Eventually, you will have to say, "No." It's not pleasant, but it's real life.

A solution: It may be time to discuss the real financial facts of life with your child. You can decide what you think they should earn by doing chores in the home, or work outside of the house, and how this will be budgeted. Explain that you are not a bank, and make sure that they understand the rules.

Mistake #5: Intervening when kids are earning and saving for something

Remember when you were a kid and worked hard to save money for something you really wanted? You were probably really proud of your accomplishment. Imagine instead that your parents swooped in to pay for it, undoing the sense of empowerment and independence you felt.

A solution: If your child is earning money and saving to get that special item, it's hard for parents to let them go through the angst of waiting to achieve that special goal. Our knee-jerk reaction may be to just whip out our credit card and buy the item. Why not encourage them to reach their goal and celebrate their success instead?

Mistake #6: Outdoing an ex

It's hard when there's a divorce and one of the parents feels that they can "buy" their kid's love. It's not easy to say "No" to your child only to find out that your decision was undermined by your ex who handed over the money.

A solution: If your rules are, for instance, that your kids have to earn some extra spending money to get what they want, then so be it. Stick to your house rules, whatever they may be.

Be a money role model

No matter how many times we utter the phrase "do as I say, not as I do," your kids and teens are going to pick up your habits and behaviors. Even with matters of money. So if you realize you made a mistake—and you don't want your kids to do the same—own up to it. Correct it. Remember your kids and teens are watching every step you make. And you have the power to help them develop smart habits from the start.

Next steps to consider

Consider a Youth Account

Help your teen learn to spend, save & invest in our secure app.

Get a financial checkup

Answer 9 questions to get a financial wellness plan.

College savings basics

Learn how to plan for future college education expenses.

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