5 Easy Ways to Lead by Example When Teaching Kids Money

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Like most parenting, teaching kids about money is not about the words you select, but by your actions.  Now that our kids are adults, it is pretty insightful finding out all of the things that we did well in addition to the things we didn’t do so well.

When it comes to talking about money with our kids, our success story rivels with the public school system.  Yep, personal finance was something that we never really talked about with our kids probably because we had no clue what we were doing.

We didn’t even really talk about money as a couple.

Then we tackled our debt in 2018 by paying back all of our nonmortgage debt to the tune of  $50,000 in only six months.  We taught ourselves how to budget and focused on investing in the future.  This process opened our eyes to all of our money management shortcomings.

One of our biggest failures was the example we set for our kids.  So often we focus on the correct wording when our focus should be on our actions.

Related:  Why Raising Kids is Like Climbing Everest for Empty Nesters

5 Things I Wish I Knew About Talking to Our Kids About Money

Now that our kids are out on their own, it is great to get their feedback.  The good thing is that they survived our bad examples and decided that they were not going to make the same mistakes we did.  Whew!

Below is a list of five things that we could have done better.  If you are seeking ways of how to teach your child the value of money, this article may help because sometimes the best help comes with what not to do stories!

1. Your credit score is not your scorecard for managing money.

Not measuring our financial success with our credit score was new to us when we started paying off our debt and getting our finances in order.  Although Rob and I sucked at talking about money with one another, we did compete with our credit scores.

It was almost a monthly ritual for us.  Our credit card statements would come in with our latest scores from Experian printed on them, and we would blurt out our credit score with pride.

Then we started listening to Dave Ramsey.  We found out that our credit score was not an indicator of how well we managed our money, but how well we borrowed money.

2. Talking about money is not a bad thing.

When Rob and I entered the world of parenting, we were kids.  I was only seventeen years old and had never looked at a bill before.

Rob’s mom gave me a crash course on paying bills and the value of a credit score.  From there, we did what everyone does — the best we could.

When the kids were young, we never talked about money in front of them.  We never wanted them to worry about adult things and thought that talking about money was pretty adult.

As a high school drop out and teen mom, participation in school and being a kid is extremely important to me.

During their high school years, Rob and I wanted to make sure that our children had the opportunity to be kids. 

The rule in our home was:  Participate in extracurricular activities with the school, and we will pay for your vehicle, auto insurance, cell phone, and make sure that you have pocket money.

The deal worked out well as both of our children excelled.

The thing is, we never put a monetary value on their hard work.  Once they left home, the realization of the cost of the items that were previously free came as a shock.

Looking back, we should have provided them with the actual value of their hard work.

The 10th Annual Parents, Kids, & Money Survey of 1,000 1-24 years old published by T. Rowe Price, reviewed allowance.  

The study showed that 61% of those surveyed received an allowance.  Of the 61% of the participants who received an allowance, 53% stated that they had to earn it.

Looking back, our children had to earn their allowance; the problem was is that they did not realize the value of their hard work.

Did you get an allowance when you were a kid
T. Rowe Price 2018 Parents, Kids & Money Survey – 18-24 Year Old Survey
N=1,000 (total respondents)

3. Brand new cars smell delicious – but they are not a necessity.

We all have weaknesses.  Buying new cars is my BIG weakness.

Looking back at our kids’ childhood, I realize that I set a terrible example with my new car buying.  It all started with our first new car purchase in 1997.  At that point in our lives, Rob and I had been married for five years with only one vehicle.

[The term “I” is intentional in this section as I am the one with the addiction.  Rob is just a bystander that has paid out a ton of money for my dumb.]

  • 1997:  Once I decided the time had come to purchase a second car, financing was our only option.  We headed down to the car lot and walked off with a six-year loan for a brand new economy car.
  • 2000: I traded that car in for a 2000 Pontiac Montana Mini-Van.
  • 2003:  Three years later, or two months following the warranty expiration, the van had engine problems.  Since we didn’t save for the unexpected, we had to trade that vehicle in.  To avoid repair expenses, I swapped the van for a 2003 Chevy 1500 Silverado Extended Cab.  With two small kids, the extended cab did not work out too well.
  • One year later I traded that truck in for a 2004 Chevy 1500 Silverado Crew Cab.

I did pretty well for a while, and my addiction to new car smell subsided for a while.  In fact, we still own that truck.

Then the bug hit again in 2012, and I decided to purchase a brand new Toyota Camry.  Four and a half years later, months before we paid the loan in full, I woke up and decided I needed another new car.

That day I walked out with a 2017 Ford Escape.  Within a week, I knew I hated that car.  I then traded that car in and lost any equity I had from the Toyota Camry for a 2017 Buick Envision.

The outcome of my senseless spending:   Pay Off Debt Fast | 11 Things We Did to Pay Off $50,000 6 Months

New cars are not better than a healthy emergency fund…

Looking back I can now see how impulsive car buying was (is) for me.  My mindless spending made me think that we were too poor to save money or invest in our retirement.

If I could only go back and tell my younger self that saving money is possible when you are not spending all of your money before you earn it.

I am just grateful that our adult children look at the example I provided them and laugh at my foolishness rather than following my lead.

Saving money tips:  What Is An Emergency Fund and Why Do You Need One?

4. Budgeting is not a bad thing.

When Rob and I started our lives together, we were broke.  There is not a nice way of putting it.  

I remember thinking if we could only make a $1,000 a week, we would be rich!

Once I started working full time thirteen years ago, it felt like we had finally arrived.  We initially continued to live on Rob’s income, and we put my new pay towards paying off our two brand new vehicles.

It was a wonderful feeling.

The problem was, once we paid off our debt, we had no plan.  We saved money for a while, yet did so without a purpose.

For Rob and I, budgeting reminded us of a time that we had to budget or we would not have food, water, or electricity.

The freedom we had in our two-income home created an environment that we stopped speaking about money with each other, let alone with our children.

Related: Budgeting for Couples | 4 Steps to Talk About Money and Not Fight

Since then, we have tackled our debt and established a working budget that is easy for us to maintain.  We think back to the days that we would both provide our kids with their gas money and think about how much further ahead we would all be today if we would have only followed a budget.

How much further ahead our adult children would be if only we would not have led them to believe based on our example that budgeting is boring.

5. 0% financing is still an indicator that you made a purchase you could not afford.

For us, 0% financing has always been our reward for managing our money wisely.  Our excellent credit scores opened the door to all kinds of “wonderful” financing offers.

Our logic was that as long as we could pay off the debt before the expiration of the offer, we were doing well.  That was our reward for paying our bills on time!

The thing that we missed with this logic is that we were reducing the amount of money that we have available to spend today.  The money that we were spending every month to pay back our debt was money that we could have saved for our future instead of paying for our past.

Rather than teaching our children to save up for those things in life you want, we showed them that a credit card was that solution.

Saving Money:  Sinking Funds & Emergency Fund | Savings Accounts that Rock

Teaching kids about money.  Lead by example.

I think back to the days when our children were home and how different our lives are now that they are out on their own.

When Rob and I paid off our nonmortgage debt, neither one of us could help but look back and think about the lessons we offered our children based on our actions.

And although we do not have the opportunity to go back and change our actions, we do have a chance today.  To communicate openly and honestly about money with our adult children.

2018 Parents, Kids & Money Survey Now that you’re older, what do you wish your parents had discussed more with you?
T. Rowe Price 2018 Parents, Kids & Money Survey – 18-24 Year Old Survey
N=1,000 (total respondents)

Going forward, our focus is to live financially healthy and share our wins and losses with our adult children.

Watching them grown and become successful in their own ways is one of the most rewarding experiences of our lives.

Although we have missed the opportunity to teach them the ins and outs of personal finance in their childhood, now is our time to help inspire them to make decisions with their money that I wish we had.

Personal Finance - Teaching Kids About Money

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