Are you teaching your kids bad money habits?

parents teach kids bad money habitsSorry, parents; if your kids don't have a grasp on finances and aren't budget-savvy, don't point a finger at the school or the marketing messages they see every day. According to a new survey, you should look in the mirror if you want someone to blame. A recently-published survey conducted by ING Direct of more than 1,000 Americans found that today's parents have a shocking lack of knowledge about their credit scores, and experts worry they're passing this legacy onto their kids.

"If parents can't pinpoint the correct financial behaviors that negatively impact their credit scores, they may be unconsciously setting a poor financial example for their children," Arkadi Kuhlmann, CEO of ING Direct USA, told WalletPop via email. This can create a cycle of poor money management into the next generation, he warns. "Most parents assume they know what financial behaviors can harm their credit scores and often feed into the credit score myths that circulate," he says. "If parents don't make good financial decisions, then their kids will more than likely mimic those same financial behaviors when they come of age."

Now, maybe you're thinking, "Oh, how bad can it be?", or perhaps you're assuming there's no way you fall into the category of American parents who are less-than-savvy about what makes their credit score tick. Well, take a look at the statistics: Less than one half of one percent of survey respondents were able to correctly identify the top ten actions that impact credit scores.

While most survey respondents did understand that paying bills or your mortgage late, or having a lot of debt, could adversely affect your credit score, that's about the only bright spot ING's survey turned up when it comes to credit-score expertise. Only about half knew that not having a credit card at all could possibly drop your score, for instance. Only about a third realized that both opening and closing credit cards can cause a score to dip. Even scarier? A mere 18% knew that a lower credit limit could harm their credit score, while only 9% grasped that keeping a balance -- even a small one -- on a credit card could lower a score. (Are you among the 91% who doesn't know why this is the case? It's because it lowers your utilization -- the ratio of credit used to credit available.

What can you do to make sure you're not setting up your kids for a lifetime of poor money-management habits? First of all, get kids involved. Start teaching them from a young age about money, savings and credit. Kuhlmann points WalletPop readers toward a section of ING's website dubbed "Planet Orange," a free, interactive tool that helps educate kids about money matters.

In addition, he advises setting family financial goals that the kids can get involved with as well. Finally, teach them to understand the difference between needs and wants. The advertising industry combined with peer pressure may make kids think they "need" a hot new toy or piece of clothing; talking to them about recognizing this desire as something different from a real need is the most valuable tool they can take into adulthood that will keep them from spending beyond their means in the first place.
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