How To Be A Financial Role Model to Your Kids

I’m delighted welcome Farnoosh Torabi, personal finance expert and best selling author, to our blog. Farnoosh is committed to helping people live their richest, happiest lives.

Read on for practical strategies to to be positive financial role model for our kids…

Growing up my mom used to put some of our holiday gifts on layaway at the local TJ Maxx and Sears. For her, it was a great way to avoid debt and hide gifts from my sticky little hands. For me, it taught the importance of delaying gratification and how we really don’t own anything until we pay for it in full. My mom probably didn’t realize she was educating me on so much with just a short trip to the mall. But her actions spoke volumes.

In my best-selling book Psych Yourself Rich, I discuss all the many influences that shape our money habits, the greatest of which are our childhood and our parental influences. In fact 80 percent of children say they learn their healthy habits from the way their parents behave – including money habits — according to the American Psychological Association. And moms actually play a bigger role than dads, according to Ameriprise Financial’s National Survey on Financial Role Models. So when our parents fought about money or conversely kept silent about money, when they taught us to delay gratification or spoiled us rotten, all of that had a life-long impact.

To that end, here are some positive habits that we can all practice to give kids a lasting positive impression about money.

Use Cash
Using a credit card can be more convenient, but do you ever explain as you swipe what a credit card is? Do children understand that you’re making a promise to pay for all the items before the end of the month? Don’t underestimate the educational power of using cash. It teaches kids that money has its limits. When they see you pay $50 for groceries and then ask you for ice cream on car ride home you can explain that you used up all your cash for dinner, so you’ll need to make dessert at home. The cash is gone, simple as that. Credit cards, on the other hand, have the tendency to make money appear endless.

Price Compare
We tend to shop in a hurry or neglect to involve our kids in the decision-making process. I remember my parents taking me furniture shopping with them – as we’d go from store to store…to store – all with the mission of finding the best deal. It was nauseating for the 11-year old me, but the message of why you need to price compare came across loud and clear. The same drill occurred when my parents went house hunting. I would overhear their discussions and watch as they financially sized up each home.

Next time you take your kids on a shopping excursion make sure to explain why you’re buying what you’re buying, especially big-ticket items. Is it a need or a want? How have you compared prices? Why did you ultimately go with the choice you did?

Spend Time, Not Money
It’s normal to have “mommy” or “daddy guilt” that results from not spending “enough” time with your kids. So what do you we do? We buy them stuff to compensate for lost time; as if that money can buy back lost time.

Don’t underestimate the time you spend with your kids. Sociologists Suzanne M. Bianchi, John P. Robinson, and Melissa A. Milkie found that despite what it seems and despite the fact that there are more women in the workforce, parents actually spend more time today with their kids than they did 35 years ago. Still, their survey found nearly 9 out of 10 parents don’t believe they spend enough time with their kids.

Avoid Hand-Outs
Allowances aside, giving handouts to your kids on a frequent basis with no strings attached can come back to haunt you when they’re older. Two out of five parents say they’ve bailed their adult children to help pay for their bills, according to a poll by If your kids ask for money, make them work for it or present a trade-off, like “I’ll give you $20 for the movies this weekend, but you’ll need to babysit your brother next Friday night as a trade-off.”

Pay Allowance On Time
If you have decided to give your child a weekly or monthly allowance, stick to it, unless, of course, your child breaks rules. But if all goes well and it’s the second Friday of the month and you don’t have the allowance ready, it may send the signal that you don’t need to always be on time with your financial commitments.

Farnoosh Torabi

Farnoosh Torabi is your go-to personal finance expert, author of bestseller When She Makes More, host of Follow the Leader on CNBC and So Money podcast. Learn more from Farnoosh at:

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About the Author

Amy McCready
Nationally recognized parenting expert Amy McCready is the Founder of Positive Parenting Solutions® and the best-selling author of The “Me, Me, Me” Epidemic - A Step-by-Step Guide to Raising Capable, Grateful Kids in an Over-Entitled World and If I Have to Tell You One More Time…The Revolutionary Program That Gets Your Kids to Listen Without Nagging, Reminding or Yelling. As a “recovering yeller” and a Certified Positive Discipline Instructor, Amy is a champion of positive parenting techniques for happier families and well-behaved kids. Amy is a TODAY Show contributor and has been featured on The Doctors, CBS This Morning, CNN, Fox & Friends, MSNBC, Rachael Ray, Steve Harvey & others. In her most important role, she is the proud mom of two amazing young men.