Money Matters – Teaching Kids to Spend Wisely
My son had a birthday last month, and he ended up with a pretty big wad of cash for an eleven-year-old. Immediately, he thought of all the things he could now afford to buy: Pokemon cards, Beyblades, a remote control car. Whee, spend, spend, spend! My husband and I glanced at each other. Traditionally, we let them spend their birthday money on whatever they wanted, but most of the time we were talking about an amount hovering around $20 or $30. This was much more; apparently people did not know what to buy a pre-teen boy, so they thought they couldn’t go wrong with green.
Well, young Padawan, we told him, greater birthday gifts come with greater responsibility. In short, we weren’t going to let him blow the whole thing on Pokemon cards and spinning top toys. We gave him about a quarter of the total amount and let him do what he wanted with it. He spent it on toys, as he had said he wanted to.
Next, we encouraged him to put half into his savings account. He balked at this, pointing out that birthday money is special money to be spent on things the recipient wants. After some discussion, we negotiated: He’d keep the money in a jar, and when he wanted to spend it on something larger than what we’d normally buy on the spur-of-the-moment, he’d have to wait one week. If he still wanted to spend the sum, he could.
Finally, we pointed out that he often asked to go to the movie theater when new movies came out, and suggested that he put the rest aside for one of those times. This way, he’d never encounter a “no” from us based on not wanting to spend the money on tickets.
It can be difficult for kids to understand the value of money, particularly in today’s swipe-your-debit-card world. I rarely have more than a few dollars in cash on me, and instead use my bank card to pay for groceries, gas, and other necessities. Here are a few tips to help kids understand a bit more easily:
*Have them pay for their own items, with cash. Also, allow them to collect and count the change. It can actually put a damper on their spending spree when they need to hand over their own dough, and it teaches them a lesson on figuring tax into the equation!
*Show them how comparison shop to get a better deal. For example, the Beyblades that my son wanted to buy were $8 each, or two for $12. While sometimes it might not be possible or desirable to spend the higher amount, my son realized immediately that when buying in bulk, the price per item is often lower.
*Give a quick lesson in using coupons, and allow your child to use them when shopping. Teach shopping savvy by pointing out when it’s possible to use a coupon on top of an in-store sale.
How do you handle cash birthday gifts? Do you let your child spend the money on whatever he wants, or do you set limits? Does it depend on the amount of money in question?
The saving part is more important now than ever, now that “pensions” are for the most part a thing of the past. I’m all for teaching kids how to save their money. A portion of the money my kids make off their birthdays always ends up in savings.
But also, I think it is important to let them spend some money as they wish (with a little guidance for younger kids). Nothing teaches a kid to spend their money wisely more than buyer’s remorse. Especially the part where they see what they really wanted to buy, but now can’t afford. And spending their savings: not an option.