Do you want your child to be financially free? Most of you would probably say yes. If we want to make our children financially secure when they start their careers, we need to leave them with good money habits rather than just money.

Before you can leave your children a set of good money habits, you need to look at your own habits and decide if they will help or hinder your children when the time will come for them to manage their own money.

Do any of the below habits apply to you?

#1. You tend to think a recurring deposit or an FD is a good investment

How it affects your kids – Your children will become risk averse and focus on low yield and inefficient investment options.

If you believe that your children don’t understand something complex like investing, think again.

How many times have you ended up talking about your recent deposit in an FD or PPF with your spouse? Your children tend to remember this even if they don’t understand it. So when it is their turn, they are more likely to think FDs than Equity, with sometimes negative consequences.

Depending on your financial goals, you need to consider what kind of return you would need. This should decide what kind of methods you use to invest. For long term inflation and tax beating returns, equity is a good option.

Your children need to understand that investing must be considered keeping returns in mind. They need to understand that it’s OK to take calculated risks.

When your money talk at home is about returns and goals, your children will tend to mimic the same behaviour later.

Replace habit with – Look at returns and your investment goals and select investment options accordingly.

#2. You believe a loan can be taken as long as you can pay it back

How it affects your kids – Your children will learn that debt is easy money, making them vulnerable to future indebtedness.

Your excessive credit card and personal loan expenses can be hindrances on the road to financial well being. Loans are meant for necessities, not desires. A loan for a house you are going to live in makes sense; not so much for the 3D TV.

Going into debt for the sake of status is a bad lesson. If you are cautious about what you take debt for, chances are, your children will be too.

Replace Habit with – Taking debt only for big budget necessities such as a house or education.

#3. You tend to spend first and think later and buy whatever you like or want even if you can’t really afford it

How it affects your kids – This will encourage your children to become thoughtless about money, turning them into excessive spenders. They will want to buy whatever they like and not understand the difference between needs and wants.

If you spend impulsively, chances are your finances don’t look too healthy. Impulse buying prevents you from achieving your savings goals.

If you are not in the habit of creating budgets for your household finances, you might end up with more expenses than you can afford.

Controlling your own impulse purchases will make your children wiser about their own purchases. If you tend to plan your expenses based on your budget, your kids will learn to plan first as well.

Replace habit with – Creating budgets and planning expenses. Think about utility and impact on finances before you buy.