No one sets out to bring up spoiled children. However, the kind, gentle approach to child rearing, which contrasts with the iron hand of older generations, combined with a more affluent society, mean it is all too common for children to have the upper hand in the family. Parents can find themselves sacrificing their financial futures to keep up with seemingly unlimited demands from their offspring. The result is children with bad money habits, which they carry through into adulthood, and parents who struggle to save for their retirement. Spoiled brats have little respect for money and place little value on it. Respect for money is a prerequisite for financial success and is something that is best learned in childhood.

There are many ways in which children can be taught to respect and value money. Parents are role models, and must themselves show respect for money. That can be as simple as paying bills on time and not leaving loose change scattered around the house. Lack of respect for money can also show up as impulse buying, spending more on yourself or others than you can afford to spend, being lazy with spending by not shopping around for the best prices or buying takeaways often because you can’t be bothered cooking.

Spoiled brats are often obsessed with ‘stuff’; the latest toys and gadgets, designer brand clothes and accessories, phones and apps. They have difficulty distinguishing between wants and needs. They have an insatiable demand for bigger, better, newer stuff and are not able to prioritise; they just want it all. These attitudes in adulthood contribute to problems with financial management including budgeting, saving and debt control.

Parents can help children avoid a poor financial outcome later in life by showing them that experiences provide more lasting satisfaction than possessions. Having fun and learning new things doesn’t need to cost a lot of money. A gift of time spent with children doing something new and exciting can provide memories that last a lifetime, whereas the latest toy or gadget is quickly discarded and forgotten once it is superseded. Adults who find happiness in friends, family and fun are much better able to save than those who seek status through their possessions.

It is essential to set boundaries for your children – not only for their behaviour but also for what they spend. In a world where money is unlimited in supply there is no need to set goals or priorities, because anything and everything is possible. Children need to understand the concept of opportunity cost. That is, if there is a limited supply of money then by spending money on one thing they are forgoing the opportunity to spend it on something else. The best way to do this is to give them a regular amount of money to spend as they wish, and to refuse to give in to requests for more if it runs out.

Children are never too young to learn the concept of delayed gratification. Again, this requires a limited supply of money but with an added dimension that allows them to choose between an amount received now or a greater amount received at a future time. Try it and see what happens! The age of the child will have a big bearing on the response.

Parents of spoiled brats often spend lavishly on private school education and extracurricular activities for their children – music lessons, dance lessons, sporting activities, gym memberships and so on. It’s great to give your child the best possible opportunities to learn and develop but within an affordable budget. If you are taking on debt to pay for child’s learning and activities it’s time to review priorities.

Perhaps the biggest problem with spoiled brats is they find it hard to let go of parental financial support even as adults. Parents who bale their children out of debt on a regular basis create a long term dependency that is financially unhealthy for all concerned. The greatest gift you can give your children is to teach them to respect and value money, to set goals and priorities and to be accountable for their own financial decisions.

Guest blog post from Liz Koh; Liz is an Authorised Financial Adviser and author of Your Money Personality; Unlock the Secret to a Rich and Happy Life, Awa Press, 2008. The advice given here is general and does not constitute specific advice to any person. A disclosure statement can be obtained free of charge by calling 0800 273 847.