Kids and Spending

Spending has gotten a bad rap. When we were kids, we were told to save money. But, as parents, if we only encourage saving, where does that get our kids? Hopefully with a nice chunk of money, but they also need to learn how to spend.

Everybody Spends

Spending is necessary. It’s part of how we live–we buy goods, we pay for services. We used to see our parents paying the bills at the kitchen table with paper bills and checkbooks. Our allowance was paper money, so we got the physical sense of spending, coins and all. Spare change was something you saved in a piggy bank. But our kids are having a different experience…with online banking, debit cards, mobile wallets: spending is virtual, and intangible. It’s harder to observe spending when money is digital. And yet, kids still need to understand that money is real and it pays for the things we have and do in life.

When our kids leave the nest and are out on their own, chances are they’ll be doing more spending than saving. Those first jobs don’t typically pay enough to cover much more than food, rent, and student loans, nevermind having some left to save. While our kids are still at home, they can prepare for the so-called real world by practicing spending.

Practice Makes Progress

So, how can we help our kids learn about spending? How do we take the idea of exchanging money for goods or services out of the abstract and into reality? It’s pretty simple…let them buy things! We’re not talking about a boundless shopping spree, but about having the experience of buying everyday things. Buying things they want, and things they need. Believe it or not, smart spending is a skill set, just like playing a sport or driving, that needs to be practiced in order to make progress. The key is giving kids the opportunity, tools and guidance they need to practice their spending skills while they’re at home so they’re prepared for when they’re on their own.

Next time you are heading to the supermarket, why not fund an amount of “lunch money” in their Till account, and have them make some lunch or snack selections for the week, and practice staying within the budget? They will begin to realize that a granola bar has a specific value. And that the granola bars they select cost more (or less) than others. The Till app has a spending history dashboard where you can review your kids’ historical purchases to talk through how and why they made certain purchase decisions.

Building Spending Skills

If your son has a growth spurt and needs some new clothes, rather than pulling out your credit card, give him a budget and let him think through what he needs, and then make the purchase himself. He has the chance to weigh what he wants against what he needs, and to make decisions based on a real and personal scenario. Is it worth it to buy really expensive sneakers if he may only wear them for a few months? Would he rather buy two pairs of jeans or one more lux pair? What are the key things he really needs? Let him think through it. If you kid shops on their own, you’ll get real-time notifications each time they make a purchase.

If your tween or teen is desperate for a cell phone, discuss the real costs associated with a device and a plan. Ask them to calculate the cost of the plan over a year, so they understand how it fits in the family budget.

If there is a big-ticket item your daughter is eager to have, work with her to understand how she is currently spending her allowance. What is she spending on food, gifts, clothes, and how might she put some of it aside to budget for that larger expenditure? Let her come up with ideas of how to save up for that big ticket item.

Real World Experience

Giving kids the opportunity to make real spending and saving decisions and tradeoffs is key to preparing them for life on their own. Along the way, talking about spending helps your kids emerge from the magical money thinking we all begin with, where money is infinitely replaceable and prices are meaningless, and into a healthy reality, where smart spending decisions have positive outcomes. These everyday money moments combined with ongoing conversations help kids learn so when they are out on their own, they’ll have money management muscles to flex.