Common Money Mistakes Parents Make
As any parent can tell you, kids are expensive. It can be tough balancing the needs and wants of a growing family with things like savings, retirement, and budgeting. And, unlike other aspects of parenting, it can be tough to get good advice about the financial aspects of raising a family. For most parents, family finance is a case of trial and error.
Let’s be honest: Parenting is not easy. There isn’t a one-size-fits-all solution that will ensure worry-free family finances. That said, when it comes to money, parents tend to make the same mistakes – and for the most part, these mistakes can be avoided with a little planning.
Not sure where to start? Check out this list of common financial mistakes that parents make. Whether you’re a new parent, a parent-to-be, or an experienced mom or dad with five kids underfoot, this list will help you avoid some common parenting pitfalls and ensure smooth financial sailing.
- Spending too much on baby gear. First-time parents are particularly prone to overspending on everything from high-end baby furniture to clothes to car seats. Yes, you probably do need a stroller – but do you need one that costs nearly as much as a small car?
- Not talking to your kids about money. For some reason, a lot of parents never sit their kids down and discuss the basics of personal finance. To some degree, this makes sense: If your parents didn’t give you “the talk” – the “financial talk,” that is – it might not even occur to you. But think about it this way: If you don’t tell your kids what they should know about things like saving, budgeting, and responsible credit card use, who will?
- Fighting about money in front of them. Talking about money is good, and it’s even okay to have the occasional disagreement. After all, couples don’t always agree on finances, and it’s wise to let kids see you and your spouse work through a disagreement. But be sure to keep it respectful, rational, and calm. Shouting, anger, or hostility during these disagreements can send the message that discussing finances is a negative experience.
- Not saving for college. The cost of a college education has gone up a whopping 213 percent[1] over the past 30 years, and today’s students can expect to pay around $200,000 for a four-year education. If you want your child to go to college, you should start saving as soon as possible. Every little bit helps.
- Saving too much for college. That said, it’s possible to save too much for college. For example, if you haven’t saved a dime for retirement because you’re funneling it all into your daughter’s college fund, it might be time to switch gears. Yes, college is expensive – but your daughter can supplement your contribution with things like working a parttime job, grants, scholarships, and student loans. You can’t get a loan or a grant to find your retirement.
- Buying too much house. This mistake isn’t exclusive to parents, of course, but it’s especially easy for a growing family to rationalize purchasing more house than they need. If it’s time to look for a bigger place, be realistic: How many bedrooms do you actually need? Is the extra square footage worth the extra cash? After all, being a parent is expensive enough, even if you’re not house-poor.
- Not having an emergency fund. Again, parents aren’t the only ones who should have an emergency fund, but with kids in the picture, an emergency fund becomes extra-important. Make sure that you enable your budget to bulk up your emergency finances – you’ll thank yourself later!
- Keeping up with the Joneses. This is a bad financial habit for non-parents, too – it’s never a good idea to engage in competitive spending with friends, neighbors, or family members. But when your kids see you doing it, you’re sending the message that success is measured by the things you can buy.
- Buying them everything they want, when they want it. Giving in to your child’s every demand may cut down on temper tantrums in the short term – but it won’t teach them anything about saving up for things they want. Encouraging your child to save their allowance or wait until a birthday or holiday helps cultivate patience.
- Giving them too much financial support. There’s nothing wrong with helping your grown kids get on their feet, especially when they’re just starting their adult lives. But if you’re not careful, that “help” could turn into an endless cycle where you are constantly footing the bill for your adult children’s financial missteps. Avoid the urge to solve all of your kids’ financial problems – you won’t be doing them any long-term favors.
- Modeling bad financial habits. Kids learn by example. If you spend money irresponsibly, use credit cards like cash, and live paycheck-to-paycheck without a budget, they’ll be more likely to behave the same way when they get older. On the positive side, if you’re doing things like creating a budget, saving up for large purchases, and living within your means, they’ll follow in your financially responsible footsteps.
Money management can be a challenge – especially if you’re a parent. But the good news is that you don’t have to go it alone. Whether you’re looking for help with credit card debt or just looking for good, old-fashioned money advice, the friendly team at American Credit Foundation is always happy to help. Contact us today for advice on budgeting, saving, and managing debt.
[1] https://www.cnbc.com/2017/11/29/how-much-college-tuition-has-increased-from-1988-to-2018.html