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How Your Bad Financial Habits are Affecting Your Kids

It’s perhaps not a stretch to say that the habits of parents can have a huge influence on kids. The things we do around our children will form part of their understanding of the world in the future. They will not only pick up our good qualities, but they’d also mimic the bad.  So, here are a few poor financial habits that parents should be careful not to accidentally pass on to their kids.

Credit card debt

Credit card debt is possibly the worst of all legal kinds of borrowings and that’s because the interest on such debt is sky high. It can be as much as 24% per annum, compounded! Considering that even the best investors have trouble sustaining compounded annual growth rates in their investments in the 20-something percentage range, having to finance debts at a 24% compounded annual interest would be a killer for anyone’s finances.

In fact, I think I’d develop a heart attack just by watching the interest compound on mt credit card debt if I had any.

Watch how you spend in front of your kids and do not let them assume that they can or should be spending wantonly with credit cards in the future.

Speculating in the markets

Around the dinner table, do you constantly mention to your spouse about some “hot” new stock tip from ‘trusted’ sources? Your kids, seated beside you and your spouse, are listening and might see risky speculation as the main method to invest in the future. This might lead to a tendency for them to speculate more with the money they have or worse, lead to a gambling addiction.

Being a constant lender to others

We all have that one friend who would constantly come to us for money. He always promises to pay you back but has done so.

If we continuously give in to his demands, our kids might misunderstand that it is right to “help” a friend by subsidizing his irresponsible-financial lifestyle. If we want to help, it is always better to teach a person how to fish, rather than just giving him fish. It is important to teach our kids on the right way to protect their wealth and not get exploited unnecessarily.

Foolish Summary

The personal finance habits of the next generation starts from us. We need to ensure we ourselves have good financial habits in order to save enough to even think about starting to invest. If we want to be able to teach our kids about money, it is important for us to be able to practice what we preach.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.