Money Missteps in Parenting

It's up to you to stand up to your kids and pass along good financial principles. Here are three common mistakes to avoid.

Talking to kids about the current financial crisis has become a hot topic, fueled in part by a story that appeared recently in the New York Times. The story's premise was that middle- and upper-class teenagers, used to being indulged and entitled, would react with anger if told by their parents that financial woes were forcing them to cut spending.

I take a more positive point of view-that parents have more influence with their children than they sometimes think, and that kids are more than willing to do their part for the family. (See my tips on talking to both young kids and teens about the crisis.)

But both of those outcomes are certainly more likely if you've established a good relationship with your kids. And parents cited in the Times story had made some major missteps along the way:

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1. Caving in to kids' every request -- and then some. One mother admitted that "sometimes it was just easier to say, 'Okay, whatever,' than to have the battle of 'no.'"

But "no" doesn't have to be a battle, as long as you give children a reason for turning them down: "No, that doesn't fit into our budget right now." "No, we choose not to buy the flat-screen TV because we're saving money in your college fund." "No, you don't need a new videogame system unless you'd like to buy it with your own money."

2. Neglecting to give kids guidance on managing money. Teens interviewed at a private school in Manhattan said their weekly allowance ranged from $20 to a staggering $150. But many of them received only vague direction on how to allocate that money.

Children need leeway to make their own decisions about spending and saving, but they should know the ground rules. Allowances should be tied to financial responsibilities -- which for teens could include paying for their own entertainment and driving expenses, and much of their own clothing.

3. Failing to make kids work for their money. "I've never had a job," said one 16-year-old. "My parents want me to focus on schoolwork."

That's a noble sentiment, but also a convenient excuse. A 16-year-old could certainly have a summer job to help cover his own expenses without jeopardizing his schoolwork.

By showing a little backbone, parents could have passed along valuable financial lessons. And the best proof of that comes from the teens themselves.

One boy said his parents had given him everything he wanted, but his grandmother had told him about World War II and rationing. "She taught me that saving is definitely important," he said.

And one girl saw clearly through her parents' efforts to bribe her. "I'm bad at math but if I get an A, my father will give me a designer bag," she said. "I love the gifts, but I'd really like to spend time with him."

Janet Bodnar
Editor-at-Large, Kiplinger's Personal Finance
Janet Bodnar is editor-at-large of Kiplinger's Personal Finance, a position she assumed after retiring as editor of the magazine after eight years at the helm. While editor, Bodnar was honored by Folio as one of its Top Women in Media. She is a nationally recognized expert on the subjects of women and money, children's and family finances, and financial literacy. She is the author of two books, Money Smart Women and Raising Money Smart Kids. As editor-at-large, she writes two popular columns for Kiplinger, "Money Smart Women" and "Living in Retirement." Bodnar is a graduate of St. Bonaventure University and is a member of its Board of Trustees. She received her master's degree from Columbia University, where she was also a Knight-Bagehot Fellow in Business and Economics Journalism.