The Bad Lessons My Parents Taught Me About Money – And How I Plan To Avoid Teaching Them To My Children

About a month ago, I wrote a piece called Lessons From Off the Grid, which described some of the good lessons about money that my parents taught me as I grew up: frugality, doing things for yourself, and never acting solely for the love of money. These are things that I try to reflect in my own life today.

However, my parents taught me some lessons that didn’t serve me as well later in life, and I worry every time I see these lessons repeated.

A windfall is something to use on a giant splurge I understand fully why my parents did this. We were among the poorest families in the area and when something would happen that would bring us some extra money, my parents would want to use it to create something special for me and for our family. Unfortunately, it often went too far: I would have nothing (or very little) for long periods, then suddenly I’d get a Sega Genesis. One time, my parents came home giddy and gave me a copy of Super Mario Brothers 3 the day after it had been released. Once, we went to a record shop and I got about fifteen albums. Then, when things were lean, there was very little money to go around. It was out of love that my parents did this, but it set me up for a life full of splurging with every paycheck, and that splurging eventually led to a lot of debt.

You get an allowance whether you do anything or not At various points in my childhood, I received an allowance. In theory, I received that allowance in exchange for doing normal tasks around the house and the farm: keeping my room clean, taking out the trash, feeding rabbits and chickens, and so forth. However, I would still get or not get my allowance completely independent of whether I did the tasks or not. In short, if you’re going to tie allowance to performance, actually connect the two. The disconnect basically taught me that the things I did really had no value at all, so why do them? This accounted for a very messy room in high school, among other things.

Saving for the long term? There is no long term When my parents would get a new car, it was always financed, then when the car was paid off, that meant there was more money to spend on frivolous things. This seemed normal when I was young – one less bill is a good thing, right? But if my parents wanted to be better off in the long run, that money for the car payment should have, at the very least, went into the bank to save for the next inevitable car purchase. Other options would have included investing in my father’s fishing business or any number of things that were actually beneficial. If we were able to live without that car payment money, why not keep saving it for the future?

Can you see where this leads? As a young adult, I didn’t see a connection between my own efforts and my income, I splurged like crazy with every paycheck, and every item paid off meant more discretionary income. Eventually, this state of affairs led to my financial apocalypse.

So what can I do to prevent a little bit of history repeating? I certainly don’t want my son or daughter (yes, another little familial tidbit for my regular readers – she’s 99.9% likely a girl) to have to go through the painful experience of unlearning foundational material from childhood, so I’m going to do things a little differently.

When a windfall happens, we celebrate on a very small scale, then save or invest the rest. We will let the children know, but also we will save or invest the rest (or directly pay off debt). This will all be done with their full knowledge, so they have a mature example of how to handle a windfall.

Their allowance will either be directly tied to chores or clearly not tied to anything at all. We have not yet made the determination of which path to follow, but we do know that mixing the two messages can create some serious confusion and some broken ideas of how to handle income.

Not only do we save part of each paycheck, our children will be required to save part of their allowance. Again, we’ll have to feel out the specifics here, but there will be some component of saving for the future in whatever allowance our children get.

My parents were wonderful people and they taught me many great things about life. The best tribute I can pay to them is to do my best in raising my own children, and I believe that this is the right way to do it.

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  1. Lori says:

    Were you and I raised together and not even know it? You just described much of my Northern Kentucky childhood and my subsequent relationship with money as an adult. I remember one day when my dad came home from work early on a Friday afternoon. Our bags were packed – we were headed for Florida. Here is the kicker: he just got his annual bonus that day. How much he got determined how far south into Florida we were going to go and for how long we could stay. He opened up his envelope and showed us 5 $100 bills. We thought we hit the jackpot! (In 1978, it was no small change.) But the point is, there was no planning, no budgeting for the year. It was a bonus, pack your bags, let go. I handled my own finances that way as an adult – a bonus is gone in a week, sometimes less, on “fun” stuff, or if I am in desparate straights – which I have been often – it has gone towards freeing up a credit card so I can breath again. I do not blame my parents. They are generous and loving people, just with no money sense. No one is perfect. And I honestly can say that I loved my childhood. It is my adulthood that has proven difficult. Well, live and learn and pass it on. I am hoping to help my niece and nephews avoid the feast and famine mentality towards finance.

  2. Deena says:

    The allowance issue… My son is 5, and he’s been getting an allowance for about 4 months now. I did a lot of reading before I started it. I only became interested in personal finance after a friend recommended THE AUTOMATIC MILLIONAIRE. I recently sold my house and got divorced, and I wanted to make absolutely sure that my profit from the house either helped me make more money or wasn’t squandered. I also thought long and hard about my parents and the lessons they taught me about money.

    I realized that they didn’t teach me about saving or making good decisions regarding money. I wanted to do that for my son. His allowance of $5 is paid to him on Sundays. He splits it between 3 cans, Quick Cash (which he can spend on anything, but when it’s gone, it’s gone until the next Sunday), Medium Term Savings (which is to be spent on something he has to save for), and College. $2 goes to Quick Cash. $2 to Medium Term. $1 to college.

    At first, he was making really bad choices. I sometimes made comments, but I really tried to let him make decisions. Now, he tends to think more carefully before he buys things, and I spend less on his many wants. He’s also learning more about numbers and math.

    I know that people may think $5 is a lot, but I want him to be able to actually purchase things and see the rewards of saving. In his medium term, so far, there’s almost enough to purchase a scooter from ToysRUS.

    I’ve watched him receive money from people. For the smaller amounts like $5 he can decide what can to put it in. Interestingly enough, he’s been saving in the medium term. It makes me happy to see that he’s enjoying saving for something meaningful.

    I personally don’t tie his allowance in to chores. I think his chores should be done because it’s doing his part as a family member. He shouldn’t be paid for that, IMHO. And yes, he does have chores.

    Like you, my parents taught me that windfalls mean splurges. My mom’s philosophy was that there will be money for what you need when you need it. It happened to work for them. However, my mom recently passed away, and my dad has no savings and no concept of personal finance, but that’s another story. I am currently trying to train myself to plan my splurges and be happy when I have “no spend” days, which are happening more and more, thanks partly to your blog.

  3. Lynn says:

    I could only chuckle when I read this and wonder as Lori (above poster) did if we were not raised by the same parents. I was raised in a home where there were no positive financial role models. Money in, money out. Sadly I did the same for years and essence passed on the same role model to my own kids. Its only been in the last couple of years that I pulled my head out of the sand and got my financial life in order.

    I got my (now adult) kids together one night and apologized to them for being such a sorry excuse for a $$$ model but in turn explained that I had had no training in how to handle or deal with money. In getting ready for this meeting, I got together a number of materials to try and help my kids get their own $$$ lives together. I wish I could say that they took all my advise but kids are kids LOL. I can only hope that sooner rather than later the proverbially light bulb will come on and they will see the light.

    I have only just in this last week become aware of your blog/site and I’m thrilled to finally see money spoken of in clear, uncomplicated language. Keep up the awesome job.

  4. Elena says:

    I have horrible budgeting habits resulting from childhood. My husband and his four siblings however have incredibly good money habits. One of the best things his parents did was this requirement. For every dollar the kids earned if they agreed to donate 10% to charity and save 40%, the resulting 50% they could spend however they want, Mom and Dad would donate a set amount to their savings ever year. At the time it was $100 which was a whole lot of money. We plan to do the same for our kids but will obviously have to increase the donated amount to whatever is “a whole lot of money”, enough to motivate them to get the habit. We also plan on not paying for college but matching any scholarship money they earn. Love your article by the way. I usually don’t comment but your well-written articles make me think about my own life.

  5. Viva says:

    I learned about finances as a kid by reading Zillions magazine. I recommend it.

  6. plonkee says:

    The best thing about this is that you are able to see what is good and what is less good about the way you were brought up (in relation to money) and you have the intelligence to seek to change the things that are less good in the next generation.

    As an aside, I’ve always wanted someone to be 99.99% certain they were having a girl and then wind up with a boy – surely it must happen at some point?

  7. Mardee says:

    One method a friend of mine uses is she gives her children a set allowance each week that is not tied to any chores. However, they are also allotted a “bonus” that is only paid out if their chores are done. It’s a nice compromise that seems to work.

  8. ck_dex says:

    This focus on financial education of families and children especially seems to have really picked up steam in the media in recent years.

    I wish our parents had benefited from the sharing of stories like yours and many others I’ve read. Thank our lucky stars for the internet, blogs and online newspapers.

  9. chris says:

    “We don’t have enough money for that”, “that cost to much”, “we can’t afford that”,

    these are just some the things I heard growing up, but I knew we were not poor.

    Now, both my parents and I (my wife as well) have graduated from Dave’s Financial Peace University and the last thing I want to ever leave my mouth is “we can’t afford that”.

    I like Rich Dad’s approach, “what can I do to afford that”, of course after deciding that “it” is really needed.

  10. Jamie says:

    I’ve read articles that suggest introducing a “matching” component to allowance. So, if you give your kid $5/week, let him know that you’ll give him another $0.50 for every dollar he saves. I suppose that could be medium or long term savings. I would think that it would help introduce them to 401k matching, as well as encourage saving in general.

  11. martha in mobile says:

    My daughter’s allowance is allocated 3 ways: 10% long term savings (we go to the bank and buy her an I-bond when it gets to $100), 10% charity (every December she decides how to donate — it’s usually Heifer International) and 80% discretionary. She has decided to have a mid-term savings jar, as well (she’s 10). I stopped buying her toys (other than birthday, holiday and report card rewards) when she started getting an allowance. It’s amazing how much less kids beg for things when you tell them they have to use their own money.

    Re: learning from your parents. My folks were Depression babies and very, very frugal. I am less frugal, but still lead a pretty modest lifestyle (pay cash for used cars and drive them into the ground, etc.). My brother has gone in another direction — makes/spends a lot of money, has refinanced his house 5 times, owned 5 cars at one time, needs the best of everything. We both blame our parents!

  12. Judith says:

    New reader here. Love the site. I’m showing my age, but my parents gave us kids each $.25 a week for allowance throughout my childhood [not attached to chores, although we had those just because we were part of a family] with the stipulation that $.05 went to the SS collection plate, $.05 went to the “bank” — a can that got emptied once a year or so into a real bank account — and $.15 we got to spend or save up for Christmas gifts, etc. It was a challenge even then, but I thank them for the early training. When my own children were small, BTW, I did a version of the same thing, although they got $1.00 a week. Now at least one of them is doing the same thing although I think the amount is more like the $5.00 cited above.

  13. John says:

    Does anyone know of a good PF magazine / newsletter for kids? I looked into Zillions, as suggested by Viva above, but it is no longer published (used to be from Consumers Union, the parent of Consumer Reports).

  14. Matt says:

    I think we all get some bad habits about money from our parents. I know I picked up some and i’m still struggling with them even though I know they’re bad habits and knew it when I was first introduced to them.

    It takes time to break the cycle of these habits and I will make every effort to not pass them onto my children.

  15. My parents are smart – and still found family life with 3 kids, when compounded with their emotions to give us all of the best life had to offer (in reaction to their childhood), extremely financially challenging.

    Now, at age 41, having learned from my past, been educated in my present, and experimented (with my now 21 year old) stepdaughter, I am very comfortable that I am on the right financial path.

    And, of course, my parents are doing differently, given what they’ve learned. I realized, however, that even if my parents had great wealth, and great money habits when I was a child, that would not have necessarily translated into them being able to teach me great money habits.

    [My book, The Kids' Bank Book, combines the popular financial education - Rich Dad, Automatic Millionaire, Law of Attraction - and the need for kids to learn things in a different way than adults do (and without lectures). There are 2 pages on the website dedicated to "What you wish your parents had taught you about money."]

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