While children don’t have to pay the electric bill or save for the down-payment on a mortgage, helping them develop good spending habits at a young age can be extremely beneficial. In a survey conducted by Money Management International, children under the age of 10 years old were found to spend 54% of their cash on wants, rather than needs, savings accounts or even charitable donations. By establishing good money goals early, instead of letting kids buy and spend on whatever they want, you can help your children understand the grownup lesson that money is earned and needs to be spent wisely.
Explain the Money Tree: Credit cards tend to make spending money a very abstract concept; to a child, watching you swipe at the grocery check-out line looks like you are getting your goods for free. Make sure your kids know that, no matter what you buy, you have to spend the money you earned while working hard. Explain about your bank account and even show them when you take money out at an ATM or to pay a monthly statement that the balance decreases. Creating a finite sum of money that they can grasp can help them understand that money doesn’t come from the sky.
Keep Them Involved: When it’s time to balance the checkbook or discuss the budget, give your kids a seat at the table. While they don’t have to know every in and out of your financial portfolio, letting them know that you can’t buy a new video game system because bills come first might help them see things in a broader perspective. Plus, if they hear certain words now, like utilities and insurance payments, it’ll come as less of a shock when they have to pay those bills themselves.
Establish a Budget: When your kids get money from presents or from earning an allowance, consider using the envelope system to help them delegate money appropriately. Label envelopes with “save,” “spend,” and “share (charity)” so they can start partitioning money so it isn’t all being spent on candy and toys.
What ways have you found to help your kids spend wisely? Let us know in the comments below!
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