Wise Spending Habits for Kids

April 21, 2006

I am currently reading 12 books. Just kidding. I’m actually working on two books right now. One of them is Neale Godfrey’s A Penny Saved, which is a book about teaching your kids both personal and financial responsibility. Although the book is a bit dated (it was originally written in 1995), the advice is sound.

I particularly like her advice on how to help your kids learn how to spend their money. She believes that a kid should be able to spend their “spendable” money on pretty much whatever they want (within reason, of course). I agree because a kid won’t ever learn how to spend unless they are able to make their own decisions. However, we all know how spontaneous kids can be and in order to help them practice self-control, she recommends:

1. Institute a cooling-off period.

A cooling-off period that is based on the child’s age and the amount of money the child wants to spend will help keep the child from making rash purchases. Here’s how it works:

You are in Target with your 10 year-old and they see this video game that they just have to have. The game is $30. According to the book, there should be a 2 week cooling-off period before the child is able to buy the game. If the game is important enough to buy today, it will be just as important in 2 weeks. Will it? That’s the whole point of the cooling-off period. Chances are, the child will find something else that they would rather spend their money on or they may just decide that they really don’t need the game.

2. Help your child figure out how long it took them to work for a particular item.

Using the example above, if the child gets an allowance of $10 per week ($6.50 after tithe and savings), they would have to “work” for nearly 5 weeks ($30 ÷ $6.50 = 4.6) just to be able to purchase that game. Once they get the hang of thinking about spending their money in this way, they might learn how to prioritize better.

3. Need vs. Want.

Is it a “need” or a “want.” For the most part, it will be a “want” since most parents provide the necessities for their kids. However, it doesn’t hurt to ask them to think about it in this way. It always cracks me up when I’m standing in line at Starbucks and an employee asks the person in front of me if they can help them. Nine times out of ten, the customer will say, “Yeah, I NEED a cup of this…” Although I’m being picky, the point is that a lot of people have the words “need” and “want” mixed up.

4. How long will it last?

This is a quality issue. Although the cheaper brand may be more “affordable,” it may not last as long as a more expensive brand. This might mean that the child will need to wait in order to buy the better brand. However, a lot of kids don’t have the patience to wait and will want to buy the cheaper product today. This is where the cooling-off period comes in handy.

5. Is there upkeep or maintenance on the item?

For instance, does the product require lots of batteries. Batteries are expensive. If child wants to buy something that requires batteries, they better budget in those costs.

These are some great points to bring up with your kids when they want to make a purchase. However, it is important to make sure you aren’t trying to talk them out of something or that you don’t make them feel stupid if they want something that you think is totally unnecessary.

Anyway, I thought these were some pretty good suggestions out of Neale’s book. I would like to know if you guys have any pointers that have 2@worked for you.

12 responses to Wise Spending Habits for Kids

  1. Although you’re presenting these as tips for kids…I think many adults would benefit from them as well!

  2. Tim,

    True. But remember that adults are just grown up kids.

  3. I also read this book, with the anticipation that I would have kids. It rocks! Interestingly, I got it on Amazon.com for just a penny :) Well worth reading, regardless of your age.

  4. When your parents say “save for a rainy day”, THEY MEAN IT!!

  5. I never like the need versus want argument. If you went through life on that, you’d live a very frugal life indeed!

  6. I think that it’s really tough for most parents to teach good money habits to their kids because so many of us have pretty poor habits ourselves. Sadly most of us get very little financial education – the school system certainly doesn’t do much for us. Luckily with The Net we now have access to many different resources both for parents and for kids.

    Thanks JLP.

    Chris
    http://www.cash-smart-kids.com

  7. Hi,

    I believe a child can spend the money wisely only if he has earned it. So the first thing we should explain them how much efforts it takes to earn money and why to save it.

  8. Internet marketing is really a great way of promoting a website. I found good results when I started internet marketing my website.

Trackbacks and Pingbacks:

  1. » Lazy Sunday Reading on Blueprint for Financial Prosperity - April 23, 2006

    […] JLP discusses some tips from Neale Godfrey’s A Penny Saved about teaching your kids about money and responsibility. […]

  2. Get Rich Slowly » How Do You Teach Kids the Value of Money? - November 8, 2006

    […] Wise Spending Habits for Kids […]

  3. » Guest Post: Thoughts on Raising Money-Smart Kids on Consumerism Commentary: A Personal Finance Blog - April 5, 2007

    […] Recently, I have been reading excellent articles on the subject of kids and money. The most noteworthy among them being Allowances for Kids: Teaching Children the Value of Money by JD Roth at Get Rich Slowly, Wise Spending Habits for Kids by JLP at AllFinancialMatters, and 15 Ways to Teach Kids About Money by Paul Richard at FamilyEducation. My initial thought was, “Wow, this issue has been beaten to death.” But after spending some time thinking about it and after a few brief retrospective forays into my own childhood, I figured out that I have something more to share on this topic. Below, I will attempt to list some of my half-baked thoughts. […]

  4. Personal Finance and Investing Blog » Blog Archive » Guest Post: Thoughts on Raising Money-Smart Kids - April 5, 2007

    […] Recently, I have been reading excellent articles on the subject of kids and money. The most noteworthy among them being Allowances for Kids: Teaching Children the Value of Money by JD Roth at Get Rich Slowly, Wise Spending Habits for Kids by JLP at AllFinancialMatters, and 15 Ways to Teach Kids About Money by Paul Richard at FamilyEducation. My initial thought was, “Wow, this issue has been beaten to death.” But after spending some time thinking about it and after a few brief retrospective forays into my own childhood, I figured out that I have something more to share on this topic. Below, I will attempt to list some of my half-baked thoughts. […]