April 26, 2022
Categories: Budgets, Debt Management, Education, Financial Goals, Financial Planning, Financial Security, Kids and Money, Tips, Youth
By Dawn Kellogg
Talking to your child about money does not have to be awkward. This series of blogs will help you navigate through the conversations and make them not only educational, but interactive and fun. Yes, money can be fun!
Lesson #4: Don’t give in if kids spend all their money and need more!
It doesn’t mean that you’re a bad parent if you say “no” when your kids have spent their allowance and need more for something that they want to buy. Your value as a parent should not be equated with money. Practicality and good financial habits are the name of the game here.
In his studies on Childhood Overindulgence and Young Adult Dispositions, David Bredehoft argues that giving kids them too much money (or things) can “result in dysfunctional attitudes as they transition into young adulthood.”
It also goes back to the “want” vs “need” which we discussed in an earlier blog. When kids have too much money at a time, it’s easy for them to satisfy every desire whenever they want. We live in a society that rewards instant gratification, so defining wants and needs at a young age will prevent bad spending habits later in life.
If your child really wants something, giving them money to purchase it straight away might not be the best decision. As we talked about in a previous lesson, setting a weekly allowance and dividing it among the three buckets of saving, spending, and sharing gives children the basic tools for budgeting. If your child wants a new item, they can save up for it, which means limiting other purchases. This will avoid developing the habit of impulse spending.
The value of money is becoming less and less recognizable for kids in this digital age. Physical money rarely changes hands due to the use of debit and credit cards. A recent survey by T. Rowe Price discovered that 60% of kids participate in online shopping, but almost 75% rarely, if ever, go into a financial institution. This is not necessarily a bad thing; it just makes it harder for kids to picture the significance of their spending.
Making your kids reimburse you in exchange for the use of your credit or debit card for an online purchase, can help them realize the value of the money they are spending.
Kids who have regular and unlimited access to money grow to enjoy a certain lifestyle which they may come to expect in later life without ever learning how to sustain that standard of living. When kids grow into adulthood and no longer have an endless supply of money to support them, the results can be disappointing.
By limiting the money your kids have access to at a young age, you limit false expectations and prevent attitudes of entitlement from developing. Your kids will learn the valuable lesson that a strong work ethic will stand them in good stead for the rest of their lives.