Finance Blog

How to Handle Kids’ Money Mistakes

Written by Teri Cettina on November 19, 2012 in Family Money  |   2 comments

You’ve given your child an allowance, and set out rules on how she’s to use it. But—oops—she slipped up. She dipped into long-term savings for an impulse purchase or borrowed money from a pal without repaying it. How do you teach a lesson from these…

You’ve given your child an allowance, and set out rules on how she’s to use it. But—oops—she slipped up. She dipped into long-term savings for an impulse purchase or borrowed money from a pal without repaying it. How do you teach a lesson from these money management mistakes while your children are still young and their mess-ups won’t affect their credit score?

As parents, we know—intellectually—that our kids are going to make mistakes when they start handling money. After all, they fall a few times when they learn to ride a bike, right? And they’ll definitely pass to the wrong team at some point during their first basketball games. We understand those mistakes. But when it comes to money, we’re often flummoxed about how to respond.

I’ve been there myself with both of my daughters, so I asked Susan Beacham, a financial expert for kids and CEO of MoneySavvy Generation, to offer some tips on how to handle kids’ money mistakes.

Adjust your parental attitude

You may think of giving an allowance as turning over your money to your kids. Wait—your money? That’s where you need to make a shift, says Beacham. When you give your kids money to budget, it needs to become theirs. Of course, you still need to teach your kids responsibility and coach them about how to use the money, but think of that green as belonging to your kiddos now.

When your child makes money mistakes—and if he hasn’t yet, he will—Beacham offers some calm, common-sense ways to handle them:

Your child sneaks money from her piggybank savings to spend on candy. You’ve talked about the difference between her spending money and her saving money categories, but she still does this.

Your response: First, remember that your child took her money from her piggybank. She didn’t sneak money from your wallet, Beacham points out. But you do need to have a talk about honesty: When your child spends money, it shouldn’t be a secret. The biggest take-away here: Your child is telling you clearly that she doesn’t fully understand the value of saving. What’s the benefit to her of delaying immediate gratification (buying the candy) for something vague and unknown that she may buy later?

The fix: Help your child decide on a concrete savings goal of her own. Does she want to save up for a new electronic game? A skateboard? Encourage her to tape a picture of that savings goal on her bank so she’s less likely to filch her savings for some Laffy Taffy. However, if your child still ends up pulling from savings for everyday purchases, Beacham says to let her do it—without judgment or finger-waving. Eventually she’ll realize that making little withdrawals here and there means she won’t have enough savings to buy that new electronic game a month from now.

By the way, scale back on how much stuff you buy your kids once you start giving them an allowance. That way, their own purchases will be much more precious to them.

Your child borrows money from a friend and doesn’t immediately repay it. You might not find out until the kids fight about it or your child frets and decides to ‘fess up.

Your response: Borrowing and lending is a concept you may not have covered with your child yet, and that’s OK—it commonly pops up in the tween and teen years. Beacham says kids often hand money back and forth when they’re at the mall, or when one child has more than another and they’re trying to figure out how to interact with each socially—and financially.

Stay calm and take this awkward situation in stride. It’s simply a reminder to talk with your child about that good old concept “neither a borrower nor a lender be.” Money loaned between friends can get awkward, and your child is learning that lesson pretty clearly. Ask questions like, “If you were the one who loaned the money, how quickly would you want it back? How would you feel if your friend didn’t pay? How can you make this up to your friend?”

The fix: Insist that your child pay back her friend right away from her spending money or her savings. If your child is short of cash, pay the friend yourself. Now have a chat with your child about the chores she’ll be doing to pay off her debt to you. Don’t forget to counsel your kid that she shouldn’t lend money to her pals, either, if she wants to keep the friendships. Chances are, she’s just figured that out!

By the way, there’s a silver lining to your kids’ money mistakes: They’re making them now, while you’re able to help them—rather than later, when the stakes are higher and you might not be available. So let your kids mess up a little, and try to be a gentle teacher when they do. The end result: Your kids will be much savvier money managers when they hit adulthood.

Teri Cettina is a mom of two daughters and freelance writer who specializes in personal finance and parenting topics. She blogs at Your Family Money. Follow her on Twitter: @TeriCettina.


  1. Maria says:

    Great information and feedback. I’m going to implement some of these suggestions.

    Thank you

    • EFX Moderator, EM says:

      Maria, that’s great to hear! Let us know how it works for you, ok? We’d love to hear your progress. Come back again soon.

Leave a Comment

Name :

Commenting guidelines

We welcome your interest and participation on this forum, but be aware that comments will be published at Equifax's sole discretion. Please don't use this blog to submit questions or concerns about your Equifax credit report or raise customer service issues. Instead, you should contact Equifax directly for all such matters and any attempts to do so in this forum will be promptly re-directed.

Some other factors to consider when commenting:
  1. Registration and privacy. While no registration is required to visit our forum, participants wishing to post a message must register by creating an account. All personal information provided by forum members incident to registration is governed by our Terms of Use and Privacy Policy.
  2. All comments are anonymous. We'll delete your name, e-mail address, and any other identifying information, including details about your investments.
  3. We can't post or respond to every comment - As much as we'd like to, we can't post every comment, nor can we guarantee that we will respond to each individual message. All questions or comments about your Equifax credit report or similar customer service issues should be handled by contacting Equifax directly.
  4. Don't offer specific legal, tax or financial advice. All of the materials on this Site are for information, education, and noncommercial purposes only and this forum is not intended as a means of expressing views or ideas regarding any specific legal, tax, or investment advice. While offering general rules of thumb is both permitted and encouraged, recommending specific ideas or strategies regarding investments, taxes, and related matters is prohibited.
  5. Credit Repair. This blog is not intended as a venue for the discussion or exchange of ideas regarding credit repair or other strategies intended to assist visitors and community members improve or otherwise modify their credit histories, ratings or scores.
  6. Stay on topic. Your comment should be concise and pertain to the specific post in question.
  7. Be respectful of the community. The use of profanity, offensive language, spam, and personal attacks will not be tolerated and egregious or repeat offenders will be banned from future participation. We encourage disagreement and healthy debate, but please refrain from personal attacks on our WordPresss and contributors.
  8. Finally: Participation in this forum may be terminated by Equifax immediately and without notice for failure to comply with any guidelines or Terms of Use. As such, you should familiarize yourself with all pertinent requirements prior to submitting any response through the blog or otherwise. All opinions expressed in this forum are solely those of the individual submitting the comment, and don't necessarily represent the views of Equifax or its management.

Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.

Stay Informed Sign up for our FREE Equifax email Newsletter