NEW YORK (MainStreet) — Your kids are smarter than you think -- and they're picking up your bad financial and credit habits.

"When it comes to kids and money, I would say more is caught than taught," says Rachel Cruze, author and daughter of anti-credit financial guru Dave Ramsey. What this means is that your kids are picking up way more from what you do than from what you tell them. So what are you telling your kids with your actions that you shouldn't be?

Money Is Stressful

"Mom and dad were always very calm when it came to money," says Cruze. She's also quick to note that she's been around a lot of people who had money as a crisis point. Her parents declared bankruptcy and came out of a huge financial hole. Especially after that, she saw her parents handling money in a peaceful and controlled environment. That's the kind of relationship you want your kids to have with money. So before you worry about anything else, control your finances. If you have to fight about money, don't do it when your kids are even in the house. They're going to pick up on that stress and negativity.

Credit Comes Easy

Ellie Kay, a family financial expert and mother of seven, urges people not to lend money to their kids.

"Whenever you lend your kids money, you're teaching them not to delay gratification," she says. Kay believes that you don't buy things until you can afford them.

"We're not talking about a house," she says. "We're talking about a new gaming system when the one they have is just fine." Loaning your kids money is easy credit. And it can become worse if you don't follow up and demand that they pay you back. She concedes this can be hard when your 8-year-old comes up to you and asks to borrow $2. "That $2 is the difference between teaching them the right lesson about credit and the wrong lesson," she says.

You're a Human ATM

Cruze isn't opposed to the idea of an allowance -- provided that your kids are working for it. "There's this habit of just handing your kids $5 when they need money, rather than having them work for it," Cruze says. When your kids have to work for money, they don't just learn delayed gratification. They also learn that money comes from work, not mom and dad's wallet. "I think their heart is in the right place, but they're not helping -- they're harming," she says. "They need to give them the ethic where they earn money rather than having it given to them."

They're Not Used to Handling Plastic

Kay is a big proponent of teaching kids how to handle plastic from a young age. That doesn't necessarily mean credit. It can also mean debit and prepaid cards. In the 21st Century, plastic is a way of life, whether you're living debt-free or not.

"Prepaid cards look and act like a credit card, but you can register it and monitor it," she says. You basically give your kids a card, tell them how much they can spend and what they can spend it on. If they don't obey, you take the card away. Do not let them use the card without boundaries. This exercise is all about teaching your kids accountability.

You Never Say "No"

"Parents say 'yes' all the time, because they don't want to scare their kids or seem like they can't afford it," says Cruze. But she firmly believes that kids need to learn to hear the word "no." After you say "no," you can spin it around and tell them to save up the money to buy what they think they just have to have. This teaches them to delay gratification, work hard for the things they want and save money to buy them.

The better you are at teaching your kids the right lessons, the better off your own finances are going to be. "Money fights and money problems are huge issues in marriages," says Cruze. And fighting will create fear and unknowns for your kids. On the other hand, when you're setting the right example for your kids, you're keeping your own financial house in order. It's a win for everyone involved.

-- Written by Nicholas Pell for MainStreet