Forget running a marathon: Parenting is the ultimate test of endurance. You have to combine the skills of a shepherd to get your slow-moving and easily distracted flock where they need to be with the patience of Sisyphus to answer those endless “But why?” questions and sally forth with load after load of laundry.
And of course, there’s the money. The Department of Agriculture estimates that it costs $233,610 to raise a child to his or her eighteenth birthday — and that’s not even counting the cost of college. That comes out to about $14,000 per year, per kid.
That is definitely not cheap.
And brace yourself: Four years of college at a state school will run you another $57,000. Make that $104,400 if your kid goes to a private college.
So how do your money habits stack up? Raising your kids is about more than just footing the bill for that final price tag. It’s also your job to teach them about budgeting and to model good money management so they enter the world as responsible, thrifty humans who won’t end up back in your basement in their thirties due to credit card debt.
So are you laying a strong foundation or modeling bad behavior? Check out these money habits to avoid when you’re raising a family:
- Not Saving for College
Seriously, the time to start this is the day your baby is born. (You looked at the total costs listed above, right?) There are plenty of ways to save for college, from the popular tax-free earnings in a 529 plan to creative use of your own Roth IRA.
No matter where you put the money, it’s crucial to start early. Having 18 years to save can bring big returns, and that’s all thanks to the magic of compound interest. If you save $50 per month at 5% interest starting the day your child is born, you’ll have just shy of $17,000 by her eighteenth birthday. If you wait until she’s 10 to start saving, you could double the monthly deposit and still only end up with a total of $11,600.
Check the math for yourself by playing with an investment calculator. There’s no better way to remind yourself to start that college nest egg NOW.
- Buying Impulse Treats When You Go Shopping
You’ve been there: After wrangling your kids through crowded grocery store aisles, you’re stuck the checkout line, and lurking beneath the selection of tabloids is a collection of goodies that would put Willy Wonka to shame. The kids start whining, and your reserves are low. You plop down the candy on the conveyor belt as a reward/bribe for good behavior (which at this point could mean not starting a toddler riot).
Bad idea. There’s nothing wrong with buying your kids something special once in a while, but you’ll get a lot more mileage out of a treat if you make a bigger deal out of it. For example, get those candy bars and savor them while taking a stroll in the park and enjoying some time together instead of ending up with chocolate smeared on the car seat because you got stuck in traffic on the way to soccer practice.
Impulse buys are a bad habit for two big reasons. First, there’s the latte factor: You’re wasting a ton of money on a regular treat that stops feeling special anyway. Second, you’re teaching your kids that mindless spending is normal and fun. This creates all kinds of expectations for little gifts when you run errands, and you’re teaching them it’s totally okay to fill their carts with things they don’t really need. Kill this habit now, and you can set a much better example for them.
- Not Talking About Money
If you grew up in a household where your parents only whispered about money behind closed doors, it can be hard to imagine discussing your finances around the dinner table. But as soon as your kids are old enough to understand math and have begun learning what coins and bills are worth at school, it’s time to bring it up.
There are dozens of low-key, age-appropriate ways to do this. A great way to start is to share your weekly or monthly entertainment budget with the whole family. Let everyone know how much is available to spend; then open the discussion about how best to spend the money. This lets everyone have a say in what you do together, and older kids can begin to research the costs of different activities. Let your kids help decide whether to spend the money on 22 pizzas or one day at the circus.
To make this more concrete for younger children, this is a good time to give the envelope method a try. Seeing the cash in person and watching it dwindle demonstrates very clearly the value of that pizza. Just make sure you don’t cheat and switch to a credit card when the money runs out.
- Not Giving Them an Allowance
A study by T. Rowe Price found that children who earned an allowance were more likely to understand the value of a dollar and felt more financially literate as adults. It stands to reason that the best education about money is a practical one, and it’s far better to have your children make mistakes with saving their pennies than it is to have them mismanage thousands of dollars later in life.
Whether you bestow an allowance as a gift or as payment for services rendered around the house, the big trick here is to take a hands-off approach once you hand over the cash. Your kid wants to blow the whole wad on Pokemon cards? Fine. But when he asks you for some extra money for the movies, the answer is no. The only way to learn the hard facts about budgeting is to mess up a little. The same goes for the teen who forgot to gas up her car and spent her money on drug store makeup instead. Let her take the bus. These real-life consequences are a lot more meaningful than any lecture, and all you have to do is let them happen.
Did we miss any terrible money habits that get families into financial trouble? Let us know in the comments!
