Teaching Kids to Make Tough Money Decisions

Last month I introduced Resourceful Mommy readers to Kidworth, a free service for parents to help teach children money management that will last a lifetime.  Their service allows parents to set up accounts for their children, create goals each child is working towards, and invite family and friends to help via emails, social sharing and invites.

Now that the holidays are almost over, many of our children have received gift cards and cash and must decide what to do with their newly received money. It may be tempting for parents to take their kids shopping immediately after the holidays so that they don’t forget to give their kids an opportunity to make their post-holiday purchases.  However, this is the perfect opportunity to teach kids about delayed gratification.

One of the best decisions my husband and I made in our twenties was to delay unnecessary purchases, excessive vacations, and other frivolous uses of our money so that we could save for our future.  These savings allowed us to quickly move from renting to home ownership and then allowed me to stay home with our children without working for the first years of their lives.  Had we not believed strongly that delaying gratification allows you to reap greater rewards, we likely would not have been in the same financial situation, one which allowed us to make important choices and live the life we wanted even more than a trip to the islands or a nice new car. The time after the holidays when kids suddenly have an increased cash flow is the perfect opportunity to talk to them about spending some money now and saving the rest for later.

1. Help your kids set specific goals: While it was difficult at times to show up to work every day wearing one of the pairs of khakis in regular, heavy rotation while my peers were using their exciting new incomes to buy expensive clothing, I had a goal in mind from my very first day of teaching to be able to afford to some day stay home with my children.  Imagining my future children and that priceless time with them was all the motivation I needed to wear the same pair of black shoes until I literally wore holes in them.  Help your kids to set specific goals for their money in much the same way, allowing them to see that choosing not to spend now will allow them to purchase something bigger later.

2. Explain to your kids how their money will grow:While the holidays are certainly a time that many kids receive gifts of cash and gift cards, they also receive monetary gifts throughout the year for birthdays, graduations, and other events.  Remind them that what they have now is not the total they will have this time next year if they save.  In our home, our daughter’s birthday is just two short months after Christmas.  Waiting two months before spending her Christmas money allows that money the opportunity to grow with the addition of her birthday money.

3. Allow them to spend some now so that they enjoy the gift they have received: While the holidays are a great time to explain to kids that saving now allows for more choices in the future, it’s also important to allow kids the chance to enjoy their monetary gifts.  In the early years of my marriage, my husband and I ate out fairly often.  It gave us a break from working all day only to arrive home to work again in the kitchen.  However, we chose inexpensive restaurants giving us the fun night out that we wanted without the expense we could have incurred.  It’s a wonderful lesson for kids to learn that saving doesn’t necessarily mean sacrificing and that money can still be enjoyed even when it’s being handled wisely.

This post was written in conjunction with a paid opportunity from Kidworth. All opinions are my own, and as always, I have chosen this opportunity carefully with my readers in mind.