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Minor Money Missteps

Any parent with a minor old enough to have control over money has probably at least thought that, You Spent Your Money on What?!, if not shouted it across a dinner table.

While the outrage at a teenager spending an entire pile of birthday money on one pair of jeans is understandable, you might want to look at it as a good thing. Sound crazy? Research has shown that young people (above the age of 12) actually learn better when they get things wrong first. So that crazy purchase might actually be just the chance you were looking for to help your child learn how to better manage money.

Here’s how to turn a costly mistake into a valuable lesson:

Discuss the decision – A child might not know why you think buying a bus ticket to Puerto Rico off the internet is a bad idea. Start a conversation about the choice. When it is your turn to express your feelings, explain why you think the money might have been better used for other purposes. Talking about the choice is going to lead to less resentment and more openness than if you come charging in with accusations and judgment.

Talk about why it happened – For both children and adults, questionable money decisions are often the result of emotional triggers. By talking about why a particular decision was made, you can help your child understand some of the feelings that can lead to rash decisions. This can help them to develop a greater emotional intelligence about their money and help them know what they need to watch out for going forward.

Keep it focused – If you really wanted to, you could probably list a hundred mistakes your child has made just in the last month. But that’s not productive. Try to avoid language like “You’re always doing things like this” or “Why won’t you ever learn?” Instead focus on solutions to the situation at hand.

Encourage taking responsibility for solutions – If the child’s mistake can still be rectified, ask them how they think it can be fixed. Encourage them to follow through with correcting their false step. Children take the message to heart more when they are held responsible for what has happened.

Don’t bail them out – Many of the mistakes children make with money will stay in their memory bank for life. If you create the association in your child’s mind between making a bad decision and having mom or dad come to the rescue, you may be sending a dangerous message. The better solution is to reinforce the concept that actions have consequences.

It’s not the end of the world – It’s actually great for kids to make mistakes when the stakes aren’t so high, so try not to get too bent out of shape. You don’t want to develop in your child a fear of making decisions on their own. Let them know that mistakes are how we all learn and that you will love them no matter what.

Show how you have learned – To model for your child how a bad decision can turn into an important bit of wisdom, share an experience you’ve had with a money mistake. Talk about why in hindsight you feel it was an error, what you did to fix it, and how you have put your knowledge to work for you. This helps to keep the tone constructive and show the child that you are not coming from a condescending place.

Next time – A handy phrase to keep in your back pocket for these situations: “The biggest mistake would be not learning from this.” When you are wrapping up your talk, ask your child how they will handle this kind of choice in the future to reinforce the positive action.

Next Steps

PenAir has the accounts and resources to help you raise money smart kids. Check out these options to take their financial education to the next level:

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