The Money Mammals like to sing, “We’ll Share & Save & Spend Smart Too!” Here are three easy ways that you can teach your kids the last part of that mantra: to Spend Smart.
1. Make your choices visible. – Show them how YOU Spend Smart. When your kids see that you’ve bought a $25,000 car, they don’t see that you bought a hybrid that will save lots of gas money or that you paid for a chunk of that car in cash that you’d saved over the last five years. Explain to them the choices that went into that purchase to help make the invisible more visible to them. Becoming money-smart is about making choices, and it’s important for them to see the choices that you make. Also, please don’t fret that you’re not perfect and don’t always spend smart yourself. BTW, it is totally ok to share that fact with your kids too. Whatever you do, please don’t let your concern about your own mistakes keep you from imparting important money-smart lessons. *Quick note: I read about this idea (explaining choices that kids don’t see) in a WSJ article a number of years ago, but I could not find the source.
2. Have them spend their own money. – One of the simplest things you can do is set up an allowance for your kids because all the advice in the world pales in comparison to real-world experience. They need to make their own mistakes when advertising (or peer pressure or any other factor) is in play. It took some time to establish in my kids’ minds that, in most cases, if they wanted something, they would have to pay. But it was definitely worth that time. They now understand that they will have to drain their own accounts to get something they want.
3. Teach them media savvy. – Advertising is powerful and is finely crafted to get your kids to spend money. And who doesn’t love watching a funny, well-designed commercial? But kids really need to understand that advertising is designed to entice them to part with their money. I think this is an essential life lesson. Give your kids a quick class in media literacy with some help from some folks at PBS.
Get the process started today. Don’t wait for a perfect time to do this, because there’s no better time than today to begin financial education for kids.