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Avoid passing bad money habits on to your kids

This article explores the impact of parental financial habits on children and advocates for teaching responsible money management from an early age.

Generally speaking, we Australians are pretty financially savvy, that is, we understand the how and why of effectively managing our money. Unfortunately, that doesn’t mean we’re actually putting that know-how into practise and making astute financial decisions.

According to the Australian Bureau of Statistics (ABS), the average Australian household debt has risen by 7.3% (over $260,000) in the 2021-2022 financial year. As of July 2023, Australians were paying $18.4 billion – that’s billion with a B – in credit card interest every year.

As parents, we’re role models, integral to shaping our children’s values and beliefs. Like little sponges, they absorb our behavioural patterns, pick up on signals and mimic our actions.

For us to replace bad money habits with good ones may be a big ask, particularly as they’ve evolved over the course of our lives. But the trouble is that kids are a cluey bunch, eager to learn from us, and not surprisingly, our money habits are among many characteristics we unintentionally pass onto them.

Of course, we all want the best for our children. But in this busy world, we’re pulled in so many directions at once that sometimes it’s all we can do to juggle our daily work, family, school and social lives. Who has time to consider the inadvertent messages we could be giving out?

Yet, when it comes to ensuring our children are equipped to build themselves a secure financial future, it’s worth the effort, right?

The table below shows a list of good and bad money habits that are commonly passed onto children.

Poor money habitsGood money habits
Impulse buying

We regularly make spur-of-the-moment purchases. Additionally, we tend to indulge our kids – we want them to be happy.

Impuslive or indulgent behaviour can inadvertently foster in children an attitude of instant gratification, normalising impulse buying.

Lead by example

As a family, we discuss the difference between needs and wants. When we see something we want, we walk away and give ourselves a cooling off period to determine whether we genuinely need the item. We encourage our kids to wait for things they want, and suggest that delaying the purchase can lead to smarter choices and savings. When shopping we compare prices and identify items that offer better value.

Not budgeting

We don’t have a household budget, preferring to manage our money as it comes in. But even though we know what bills are due we often seem to have trouble getting the money together. Sometimes we run out of money before pay day.

Not budgeting can engender a culture of living pay-to-pay and children can grow up not understanding the importance of tracking spending and living within their means.

Family budgeting

We involve our children in creating and monitoring our household budget. We discuss decisions around allocating money for different purposes so that when our kids receive pocket money or gift money, they can practise budgeting by setting amounts aside for saving, spending, etc.

Credit card misuse

We rarely use cash; using a card is fast and convenient. Although occasionally we max the card out we make sure we pay off as much as we can every month. Some months, depending on expenses, we can’t manage the full balance.

Cards, while useful, can cause children to perceive them as a source of unlimited money.

No free money

We have taught our children how to read our card statements. They know how to check purchases against receipts and understand how interest adds to the card balance. We involve our kids in making card payments and explain the consequences of not paying the full balance each month.

Not saving

We’ve never set up a structured savings plan so have little-to-no savings. We’d like to take a holiday or have a nestegg for emergencies but there never seems to be any money left over at the end of the pay cycle.

Children seeing parents struggling to save may not learn the value of saving or setting goals.

Set goals, save

We stick to our budget and always try to allocate a portion of income towards savings, and encourage our kids to do the same. We get them to set short-term goals like saving for a new toy or book, and long-term goals like an outing or a larger purchase, and then help them create a savings plan to achieve their goals. We make it fun by using a visual chart to track progress and when they reach their goal, we celebrate the achievement, making a special occasion out of buying the item or attending the event.

Failing to discuss

We never talk about money with our kids. They have a limited understanding of how money is earned and how we use it.

Failing to discuss how money is earned can lead to children not grasping the concept of money as a finite resource, and appreciating its value. Widespread use of credit cards or taking cash from ATMs suggests that money is readily accessible.

Have the conversation

We have always been open with our kids about the household finances. We want them to understand that money needs to be earned, and if not used wisely and allocated appropriately, it can run out.

We have also provided the opportunity for them to earn pocket money for doing age-appropriate household chores.


If we can make time to examine the way we view and use money, and replace poor habits with good ones, we can positively influence our kids by:

  • emphasising the importance of planning early in life,
  • encouraging them to make informed decisions,
  • empowering them to set goals and work towards achieving them.

As parents we have a limited opportunity to equip our children with tools like, knowledge, confidence and forward planning skills – before they decide they know more than us!

So, by modelling good financial behaviour ourselves, we can instil the habits that will set our children up for a life of financial freedom.

I don’t know about you, but if I can achieve that, I’ll know that I’ve done what I can to enable the next generation to succeed and thrive.

What a legacy!

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