Personal Finance

How to stop sending mixed money messages to your kids

"Be good because it's the right thing to do -- oh, and here's $5 for cleaning your room."

A conflicting message, yes, but surprisingly common. According to T. Rowe Price's " 6th Annual Parents, Kids & Money Survey ," 48 percent of parents bribe their children with cash to behave well. Also, nearly a quarter of moms and dads claim to be savers but actually live in debt, and three out of 10 regularly raid their little ones' piggy banks. So much for consistency.

When actions don't match lessons, confusion sets in. Without adequate explanation or demonstration, commands like "go to college," "get a job" and the vague "be financially responsible" can befuddle. To prevent blank stares (or worse, the dreaded eye-roll), it helps to understand why so many adults fail at giving kids money and credit guidance. We'll tell you what the experts recommend instead.

What the kids are (or aren't) hearing

It's not hard to see why parents clam up or give incomplete answers, says Matt Kelly, Money Savvy columnist for the Durango Herald, in Colorado.

"They often think they're doing their kids a favor by not burdening them with the difficult money stuff," he says. "We want to be shiny happy parents. But when money is mysterious, kids fill in the blanks with their own projections."

Credit cards are a perfect example of this, Kelly says. "Adults are absolutely not having the conversation about them with their kids," he says. "They often don't know how they work themselves or are not willing to admit, 'We have debt and can't do the things we want to do because of it.'"

That leaves children to draw their own -- and frequently wrong -- conclusions, such as the idea that charging unaffordable expenses is OK.

"If no one talks about paying credit cards or being in debt, it seems to magically take care of itself," he says.

When genuinely positive attitudes about financial matters aren't conveyed and kids hear only heated arguments or worries about bills, it's only logical that "money gets mixed up with stress, fear, ego and self-worth," Kelly says.

Contrary to what many parents might believe (or may hope), students aren't receiving the bulk of their economic education at school. A March 2014 H&R Block study, " Teens and Their Financial Future ," found that more than 75 percent of minors rely on their adult guardians for financial information.

So the kids are asking, but what are they hearing? Responses that are too often incomplete, muddled and even hypocritical. Tori Molnar , a Pittsburgh 17-year-old who's the CEO of a company called Utoria that helps young women become entrepreneurs, reports that many in her peer group are unsure about money, the roots of which are the messages imparted at home.

"The most confusing one is about college," Tori says. "Everyone tells you college is everything. It leads to a better life. Do it even if you have to take out thousands in loans. Then all you get is a job that pays $30,000 and you still have to pay the loan all your life!"

Much of her city is plagued by poverty, so securing employment is a logical focus. Yet, she says, underlying issues don't get addressed: "Parents just say, 'Don't be in the same position I am in,' but they don't even know what that means or how to get out and then the kids are confused about what to do and think." Additionally, she says, most in her age group don't understand the basics of household expenses, taxes or loans because their parents avoid discussing such subjects.

Confusion isn't limited to struggling families. "We have billionaires here, too, and the kids feel pressure to keep up but they don't know how because their parents don't talk about it," Tori says.

Noble values, poor execution

It's not like parents are trying to hurt their kids by sidestepping money conversations or projecting inaccurate realities. Quite the opposite, experts say.

"Many are in a trap of living for their kids," says Rancho Palos Verdes, Calif.-based Evan Money, producer of an upcoming documentary about the power of verbalization called Words of Art . "They make poor decisions like spending too much, getting into debt, making too many sacrifices, all for the good of their kids. But then they give a guilt trip when it doesn't work out. No wonder kids are so confused!"

Consider this example: yelling at your son after he ripped a hole in his expensive jeans may make sense to you, but not to him if he has no context for their worth. All he hears is anger. Instead, break down the cost of the pants in terms of working hours before buying them. Relay a message on the value of time and effort by being straightforward: "My take-home pay is $15 per hour, and the jeans are $80. That means I have to work over five hours for them. Now you can see why you have to be careful."

And then there's hypocrisy. "Do as I say, not as I do" is a guaranteed way to create both confusion and disrespect. "It's like the dad lecturing the importance of a clean bedroom but his own office is a mess," Money says. Your creditability tanks. If you're good with money, show it. But if you're bad, at least be honest.

Execution, even when the intention is sound, can fall short if you take the lesson only halfway.

"Take the summer job, for instance," Kelly says. "A lot of parents encourage their kids to get one, and that's great. But they don't teach them to budget their earnings, which is just as important. It's a lost opportunity. The kid's still lost with what to do except spend. You've got to teach them the rest."

He says it's up to parents to help them set aside a portion for the future and to donate to charity.

Teach, don't preach

To be effective, demonstrate while also verbalizing the whys and hows of a task. It's all about modeling behavior, says Edison, New Jersey-based Saul Simon , author of the family financial education book "Simon Says Love Your Legacy."

His tips:

  1. Be a financial leader. Let your kids hear you say things like, "I'm going to make and bring my lunch to work from now on. This way, I can save more money for your college and for vacation." Then do it. The message: Allocating funds doesn't have to be stressful.
  2. Save together. Open savings accounts with and for the kids, then incentivize their contributions with extra from you. "My son collects change and then deposits it when it's full," Simon says. "I match funds." The message: Preparing for the future is valuable and doable.
  3. Choose a charity and contribute as a family. Most kids feel passionately about something, whether it's preserving wildlife or helping others in need. Help them identify a worthy organization and donate together. Then say, "Look at the difference you can make in the world!" The message: Money is not just for personal pleasure.
  4. Say mea culpa. Admit your errors in front of the kids. For example, Simon says, you might say, "Listen up, you guys. I spent too much on X, so we're not having sushi tonight -- we're having burgers. I need to be more prudent." The message: Money mistakes are normal and can be overcome.
  5. Develop an ethics plan, then stick to it. For example, tell your kids that their savings is sacred. Dipping into it sets a terrible precedent, so don't do it. The message: It's never OK to steal.

Finally, if you're among that half of parents who are paying kids to write thank you cards, be polite, or toss their dirty socks in the laundry basket, stop right now. "That's so distorted," says Money. "It leads to the stripper mentality of 'I'm only going to do good things if I get paid for them.' That's one of the worst and weirdest messages you can send."

See related:Overexposing kids to money problems is a bad idea , The money topics your kids wish you'd talk to them about

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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