Parents Should Avoid These Money Mistakes

You’ve welcomed (or are planning to welcome) a new bundle of joy. Congrats! So much to think about, plan for, and anticipate. Including finances.

Having a baby requires planning for many things, not the least of which is money. Of course, you want to exercise responsible spending before, during, and after the baby arrives. But you also want to set a good financial example for your child while they’re growing up. No parent wants to set the stage for children to become adults who don’t know how to save money, live beyond their means, or create fiscal chaos.

Money doesn’t grow on trees, but you can put yourself, and your offspring, on a better financial path by taking these financial steps before (and after) your baby takes their first steps.

Not Setting A Good Financial Example

Kids see everything. They watch what you do, try to imitate you, and, hopefully, want to be like you. This means that if your financial life is not in good shape, your children may grow up to form the same costly bad habits.

A survey conducted by investment firm T. Rowe Price found that parents who had experienced bankruptcy or who carry significant credit card debt are more likely to have children who spend money as soon as they get it. As the saying goes, the apple doesn’t fall far from the (money) tree.

Not Teaching Your Children About Finances

In a 2018 T. Rowe Price survey, 4 in 10 adults indicated they didn’t receive any formal financial education during their younger years. Since schools aren’t teaching the basics about money, the responsibility falls on you.

Start by emphasizing the importance of saving and how to accomplish it in easy-to-manage steps. As they get older, you can delve into topics such as budgeting, financial planning, debt management, and how to use credit cards responsibly. If you don’t provide insight into how money impacts day-to-day living and choices, they could find out the hard way once they’re on their own.

Not Saying ‘No’ Enough

Give yourself permission to say no to your kids: You don’t need to indulge their every whim (or whine).

Experts agree that children need to understand the importance of delayed gratification and that those who are shielded from it may be in for major disappointments later in life, especially in financial matters. Children who learn that something worth having is worth saving for tend to learn the value of things more quickly and are more likely to grow up to be financially responsible adults.

Not Saving For College Early On

Talk about a lesson in the benefits of preparing and saving for the future:  Four-year private college tuition and fees can average an astounding $35,830 says the College Board. But according to student loans giant Sallie Mae, parents save only about $18,000 for college, on average, leaving a huge gap between what’s due and what you can do to pay it off.

College may seem like a long way off, but time flies when you’re having fun raising your kids. Start saving early to put yourself in the best financial position to manage education costs. Check into state 529 college savings plans for easy ways to set money aside for future education plans, and to possibly score some tax breaks as well.

Not Investing In Sufficient Life Insurance

According to the trade group LIMRA, more than 40% of adults have absolutely no life insurance, and more than a third of households surveyed indicated they would be financially strapped within a month if the primary breadwinner passed away.

Life insurance can be a lifeline when it comes to covering expenses, big and small, in the here and now as well as in the future. By taking out a life insurance policy, you can help ensure that your family doesn’t have to stress out about finances and make undue sacrifices.