Teaching Kids to Spend Smartly
Saving everything for later with little enjoyment now is not a balanced view either, and can lead to binge spending.
Therefore, the ability to manage spending is also something that can be learned and practiced.
Firstly, teaching kids the difference between needs and wants is the first step. Wanting more than you can afford can get you into trouble if not managed correctly. Not all debt is bad debt, but if out of control or not correctly managed it can put people under great financial stress. Thus, teaching kids when to spend and on what is of great importance. We need to show them that the money they spend now is the money they don’t have in the future.
If there is something expensive that your child really wants, you could even loan them money at a fixed interest rate. This will explain the idea of interest. Once they pay it back I will always put the interest in a separate jar for them to keep.
If my daughter really wants something, I let her think about it for a couple of days and see if she still wants it. Usually, she sees an ad and wants something but when I ask about it a few hours later, she cannot remember. The things that they really want and talk about are the items to write down as savings goals. When your child earns enough to reach the goal then they can enjoy going to the store and spending their money.
Spending wisely is a great skill to master. Deciding when, where, and with what are the details we often overlook. Shopping with coupons or in sale times is the best, as you get what you want for less. Teaching kids how to compare deals, shop online and compare products is essential in today’s environment. If you are getting the same good, why should you pay more? Knowing when the sales are on or signing up to discount sites that have special deals really helps. Everything adds up.
A great app in Australia that helps kids manage their money through a debit card is Spriggy. The app is made for kids and has parent controls to see what they are spending and whether they have earned money successfully by doing chores. You can also manage regular pocket money through the app. A child can chose the card design they receive too. In an era of cards, having kids practice through a debit card and through the app (and easier than taking coins to the shops) is a great system. If you sign up to Spriggy they'll give you $5 to get started.
Explain to your children that they should wait for a period of time from when the product becomes available to the time they buy it. This is especially true with technology as it gets cheaper (and often better, as the kinks get worked out) the longer they wait for it. Depending on the item you can usually save anywhere from 10% - 40%. Also, explain that there are often hidden costs such as shipping, insurance, tax etc., to ensure that they are really doing a proper comparison on the cost.
When children start earning money, if saving all of it isn't practical then look to allocate certain percentages to certain things, like spending, saving and giving. This helps kids see that they have something for the future but also something they can have fun spending now. This is all part of good money management and something kids should have confidence in.