Teaching Kids About Money: Research Reveals The 5 Biggest Mistakes Parents Make

By Amy Morin

Your kids pay more attention to money matters than you think, according to a study conducted by researchers at North Carolina State University and the University of Texas. Unfortunately, the one place many kids aren’t hearing about money is from their parents. Instead, they’re learning about financial matters from TV, music lyrics, and the internet. If you’re not actively teaching your kids about finances, they’re likely to develop misconceptions about money.

Several research studies highlight these money mistakes many parents are making when it comes to helping kids learn about important financial matters:

  1. Parents aren’t recognizing that kids get stressed about money.2014 survey by H&R Blockshowed that teens experience a lot of stress about money. High school students who participated in the survey reported worrying about obtaining the same standard of living as their parents, paying off student loans, and finding a job.

A lack of understanding about finances can fuel a child’s anxiety about money. Ask questions about how your child feels about his financial future. Talk about future career aspirations and discuss how much the average salary is for people in that field. Have ongoing conversations about how to pay for college without incurring a lot of debt. These types of conversations can provide education and reduce your child’s worries.

  1. Parents don’t teach kids that online shopping requires real money. Technology has certainly changed the way kids view currency. Kids are more accustomed to shopping online than going to a bank, according to the T. Rowe Price 2014 Annual Parents, Kids and Money Survey. While 60% of kids said they shop online, nearly 75% said they rarely or never go to a bank.Online banks and online shopping mean kids don’t ever see money change hands. Therefore, it’s hard for them to grasp the fact that they’re spending real money when they’re shopping online. Take your child to the bank and make sure he understands how banking works. It’s important for kids to have a clear understanding of how paychecks are deposited and how money is withdrawn.
  1. Parents lie to kids about money. Sadly, 28% of parents admit to lying to kids about money, according to the T. Rowe Price survey. Some parents may lie because they feel uncomfortable disclosing the truth – like if a child asks how much money his parents earn. Other parents may lie about money to avoid problems – such as saying, “We can’t afford that,” rather than saying they just don’t want to buy it.

Lying about money will only send the wrong message to your child. He may learn that lying is a good way to cover up for financial problems or that lying about money is an acceptable practice. If your child asks a financial question that you’re not comfortable answering, be honest and say you don’t want to talk about it. Although lying to your child about money may be helpful in the short-term, in the long-term it will only cause more problems.

  1. Parents avoid conversations about money matters.Kids are interested in learning more about money, but many parents avoid teaching them. A whopping 74% of parents said they have some reluctance to discuss financial topics with their kids. And 59% of kids said they wished they could be smarter about money, according to the T. Rowe Price survey. While some parents are embarrassed to talk about money, others feel like they are bad role models and shouldn’t be discussing finances with kids.

Be willing to get over any discomfort you feel when discussing money. Admit to some of your financial mistakes and talk to your children about the steps you’re taking to address those issues. Make money an ongoing topic of conversation in your house by bringing it up regularly.

  1. Parents aren’t discussing the importance of investing. Kids aren’t learning about the importance of retirement accounts or even college funds and research shows that parents are even less likely to discuss the importance of investing with girls. This lack of education may be taking a toll on the way young people view risk. People under the age of 35 are taking overly conservative approaches to investing, according to a 2013 study by the Investment Company Institute.

It’s essential to teach both boys and girls about investments. Show your child charts and calculators that outline how investing early can lead to a much larger nest egg. If you lack knowledge about investing, it can be a great time to learn more to benefit yourself, and your child’s future.


Amy Morin is a psychotherapist, psychology instructor, and speaker. Her book 13 Things Mentally Strong People Don’t Do is on sale now. She’s frequently quoted in national media outlets. She also writes for Forbes and About.com. For more visit AmyMorinLCSW.com.