Kids and Money: Five Tips for Teaching Your Kids Responsible Spending Habits

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Do your kids spend money like drunken sailors on shore leave? Mine do. Or at least they did, until we made a few changes.

Often, my kids have more cash than I do. Oh, who am I kidding, they always have more cash than me! Between their weekly allowance, birthdays, and grandparents, they bring in quite a haul.

A couple of my kids are super conservative and responsible with their money. And then there are a few who think they have to spend all of their money before it burns a hole in their pants.

Because of the latter, Carrie and I came up with a few, I guess you could call them, fiscal policies, for our kids and their money.

Saving, Giving and Spending

Any time your kids receive money for their allowance or from grandma, divide it up into three categories. Ten percent will go onto a container labeled “Savings”. Ten percent will go into “Giving”. The remaining 80% can go into your kid’s discretionary account. My wife Carrie came up with this a couple of years ago and it worked. Somehow, we got away from it, but I think it’s time we get back to it because it helped my oldest daughter to become a saver, and it helped all of my kids to see the importance of tithing or giving.

Start a Bank Account

When each of our kids have accrued $100 we established a savings account for them. Some banks will allow you to start a kids account for as little as $20. If their money is in the bank, they can’t spend it on an impulse item. Out of sight, out of mind.

No Junk Food

My kids used to always bring a couple of dollars when we went to the grocery store. When we were in the checkout line, they would go look at the junk food rack. I let them buy candy for a short while because I wanted them to experience the purchasing process. However, this quickly got out of hand. I came to realize that given the opportunity, they would spend ALL of their money on candy. Now, I don’t allow my kids to spend their money on junk food. At all!

Put a Stop to Backwards Spending

Once I put an end to junk food spending, my kids started stuffing $20 or $30 in their pockets when we left for the store. I soon came to realize that they were engaged in the phenomena of “Backwards Spending”.

Instead of determining a need or a desire for a certain item and then purchasing it with their money, they were wandering around with money, looking for items to spend their money on! That’s backwards! That’s what drunken sailors do when they finally get shore leave after months at sea!

Now, my kids understand that the need (or desire) comes first and financing it comes second. At least, they know that’s my expectation. Whether or not they agree, won’t be determined until they are adults. For now I have implemented the…..

30 day rule!

When we go shopping, one of my kids is always telling me how badly they need a new toy that costs more than $20. Then four days later when we are at that same store, the same kid needs some other expensive toy instead. To combat their backwards spending, and their fickleness, I instituted the 30 day rule. When a kid tells me they want to spend their money on an expensive item (anything over $20 in our house), they have to wait 30 days before they can purchase it. This turned out to be super valuable because it taught all of us the following:

  • It taught my kids patience, which in today’s world has become almost impossible.
  • My kids learned that desires change over time and that it’s better to be sure that you really want something before you purchase it.
  • They realized the satisfaction of knowing that they were buying something that they really wanted and that they would use over the long run.
  • Sometimes, passing on the purchase and putting the money into savings was the best option.

Most Importantly, It Starts With You!

This is no doubt, the hardest and most important action we parents have to take when we are trying to help mold our kids into fiscally responsible adults. After all, we are their first and most important examples. So, before you can teach your kids how to handle money responsibly, you have to figure it out yourself!

This is something I struggle with big time. I have to make changes myself, especially when I’m hungry. I make lots of bad decisions when it comes to food. Hopefully, knowing this, I’ll be able to come up with some strategies for not falling into this spending pit. I’ll keep you guys up to date.

What is your spending Achilles Heel? Clothes? Gourmet Coffee? I would love to hear your answers. Please let me know in the comments section.

Brian at Daddy Go To Timeout


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