The 4 Biggest Money Mistakes Parents Make

We as parents bring a lot of baggage and emotion into the topic of money, and we can quickly feel guilty or embarrassed by what we did and didn't teach our children. It's important to keep in mind that there often aren't clear-cut right answers.
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What are the common mistakes parents make when teaching their kids about money -- often without realizing it?

Hmmmmmm. How much time do you have?

Seriously, though, I find this question particularly interesting, mostly because we parents tend to adopt well-meaning rules and theories about the "best approaches" to all kinds of questions... often to find out we are completely and utterly wrong.

The fact is, one parent's error can be another parent's ideal. I know some parents who lament the fact that they didn't force their kids to get paying jobs in high school, while others worry that they allowed their offspring to work too much and didn't push them hard enough to focus on their studies.

I also know that we as parents bring a lot of baggage and emotion into the topic of money, and we can quickly feel guilty or embarrassed by what we did and didn't teach our children.

It's important to keep in mind that there often aren't clear-cut right answers. You do the best you can, and base your decisions on your values and priorities.

Here are four universal mistakes that most parents make without realizing it:

1. I didn't have much as a kid and I don't want my own kids to want -- or wait -- for anything.

It always amazes me to hear parents worry that their children aren't being given enough. I know of parents who feel like a failure because they couldn't buy their kids all the holiday presents on their four-page wish lists or go on the four-star vacations that "everybody" else had taken.

Making sure kids know that they can't always get what they want when they want it is actually one of the best gifts you can give them. Academic research shows that teaching kids delayed gratification is a skill that will help them for life.

By now you may have read in my column (or elsewhere) about former Stanford professor Walter Mischel's famous "marshmallow experiment." In the late 1960s, Mischel gave little kids one marshmallow and told them they could eat it now, or wait 15 minutes and be rewarded with another one later.

Studying those same kids years later, he found that those who were able to wait grew up to have fewer behavioral problems, less stress, stronger friendships, and higher SAT scores. Waiting -- not getting! -- is the Holy Grail.

Research from Karen Holden, a professor at the University of Wisconsin-Madison, and others have linked the ability to wait with the ability to save. Just like you wait in order to get two marshmallows, you need to save up the money to buy a bag of them in the first place.

But is there a way to foster that waiting/saving quality in our kids?

The answer, thankfully, is yes. Some researchers at the University of Rochester reenacted Mischel's marshmallow study last year, but added a clever twist. They looked at what type of environments influenced the likelihood that a child would be able to delay gratification.

The findings? Kids operating in stable environments in which adults stick to their word are more likely to wait because they trust they'll get what's promised.

We assume adults are the only practical ones in the room, but kids are actually weighing "the practicality of waiting," lead study author Celeste Kidd told the Washington Post.

2. We're in big credit card debt, but thankfully our kids don't know it.

Even if you think you're keeping your money habits private, chances are your kids know more than you think. When a family is living beyond their means and overwhelmed by debt, there usually are arguments, whispered secrets, and a lot of shame.

Though I know some adults who are extremely responsible with money because they saw their own parents mess up all the time, often it's the reverse.

In fact, a recent study published in the Journal of Family and Economic Issues surveyed more than 400 college students and found that kids whose parents argued about money were twice as likely to have two or more credit cards and three times as likely to be carrying a decent amount of debt.

We worry about not giving our kids every latest gadget they want, but having parents who live happily within their means is really what will make them happy in the long run.

3. Working very long hours is the only way to give my kids what they need.

There's no question that you need to work hard to provide your family with the basics these days, and so many parents are holding down two jobs just to make ends meet.

But one of the most surprising studies I read last year surveyed 8,000 families over the course of a decade and found that those who ate together at least four times a week were more likely to be financially secure.

Although there are many factors to explain this phenomenon, the researchers on this study say that the main link between these seemingly unrelated topics -- financial smarts and family meals -- is a factor called self-regulation.

If you're able to prioritize family meals in spite of your busy schedule, you're probably able to prioritize making smart financial decisions. This is worth considering before you schedule another late-night business dinner.

My advice: Whenever possible, sit down to dinner with your kids. And while you're there, use the time to talk about money. Whether you're raving about the great airfare you just scored to go visit Grandma or debating whether to replace the couch in the living room, your kid is learning from every decision, big or small.

4. Good parents put their kids' college costs above all else.

Many parents think they should sacrifice their own financial future in order to send their kid to his or her dream college. It's time to rethink this one.

First, due to the astronomical cost of college these days, even if you put all your savings toward your child's dream school, you and he or she may still need to take out a ton of loans to go to a particular school -- when there are literally thousands of lower-cost options out there.

It may simply not be worth it.

What's more, financially speaking, it's much smarter to max out your own tax-favored retirement savings plan at work, especially if your company matches your contribution -- something a college savings plan does not have.

The reality is, although a child can borrow for college, you can't do the same for your retirement. What's more, bankrupting yourself for your kid's college will likely mean he or she will have to take care of you financially when they are in the middle of a major life stage, like starting a family.

Need more convincing? A new study from the University of California-Merced shows that the more money parents contribute for kids' college, the lower their kids' college grades.

The reason: Financial support allows students the luxury of performing adequately enough to graduate, without pushing themselves to do their best.

Not surprisingly, the students who got the lowest grades said their parents never talked to them about the academic responsibility expected of them in exchange for such a generous gift.

Proof that it all comes down to parents and kids talking about money.

What money mistakes have you made, and what have you learned from them? 'Fess up here -- no judgment!

Beth Kobliner is a personal finance commentator and journalist, the author of the New York Times bestseller Get a Financial Life: Personal Finance in Your Twenties and Thirties, and a member of the President's Advisory Council on Financial Capability. Visit her at, follow her on Twitter, and like her on Facebook.

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