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Kids and Money in a Digital World

7 Concrete Ways to Raise Financially Savvy Children

Mom and Dad help their newly employed son and a few friends move into an apartment one Saturday afternoon. The crew works hard, and when the day is done, everyone is exhausted and hungry. That’s when the young man turns to his father and says, “Pop, can you buy us some pizza?” 

If you hope to have your children financially independent from you sooner rather than later, you need to take steps now to make that happen. A Cambridge University study has shown that children as young as seven have developed financial habits. Where are they getting these habits? Crickets.

Well, that would be from you and other people in their lives – including friends and teachers. There’s a wrinkle to this: In a world of credit cards, debit cards, mobile payments, and online banking, your children may be getting a very narrow view of how to manage money. Add to that our cultural tendency to not talk about money, and we have a recipe for financial naiveté. 

What can you do to help prepare your kids to leave the financial nest? Keep reading for a few ideas. 

1. Will your kids be attending any birthday parties this year? Instead of buying a present for the friend or letting your kids pick something out and then simply paying for it, try this: Hand them a $20 bill (or whatever your family budget is for birthday presents), and help them select a present for the child. Teach them about sales tax. They don’t need to calculate the sales tax cost in their head (though a teen certainly could). The entire cost of the gift, tax included, should come in at or under the budget you set for yourselves. 

2. Do your kids receive an allowance? Let them know they will be expected to contribute a small amount to the gift. In our family, our elementary school-aged kids contribute $3 to their friend’s gift. If your kids attend a lot of birthday parties, consider slightly increasing their allowance to help defray the cost, rather than dropping the expectation that they contribute. The whole point of allowance is to help kids learn to manage their money responsibly. 

3. When you’re driving the kids around, have you ever heard one of those sleazy ads on the radio encouraging you to attend a seminar to learn how to flip real estate? Or perhaps a promise that you can “get out of debt fast” if you just call an 800 number? Talk to your kids about those ads. Who is really making money here? Can you really get out of debt fast? How might you keep from going into debt in the first place?

4. Is there a fundraiser coming up at school? Many teams and clubs sell everything from potted plants to gift wrap to raise money for uniforms and equipment. Make sure your child manages the process. Let her keep track of payments, add up the sales, and make a contribution from her own savings if the fundraising goal isn’t met.  

5. Do you have tweens in your life? You probably have a budget for new clothes. Involve your tweens in more than simply picking out the clothes. Sit down together and write down what they need and what they want. Help them figure out how to maximize their budget. Give them the cash, walk them through the process, accompany them to the store, and do not bail them out. 

You might incentivize them to spend less than allotted by allowing them to keep whatever is left over. And use cash! It’s hard enough for adults to control spending when using a debit or credit card. Handing over cash to the sales associate makes it real. 

6. Are your teens driving? Make them responsible for their gas money and a portion of the insurance for the vehicle they will be driving. If they need opportunities to earn money, help them out a little, but encourage their entrepreneurial spirit (babysitting, mowing lawns, pet care, etc.).

7. Have a student headed off to college or technical school next year? Introduce him or her to the world of grocery shopping. Believe it or not, grocery shopping confuses a lot of adults. The rub here is that food is clearly a need, but the temptation is to fill our grocery cart with lots of things we want (rather than need), which can easily lead to overspending. Sit down together and plan one or two meals a week with him. Give your teen a list, a certain amount of money, and let him purchase the list. Teach him how to cook simple, healthy meals. These are life skills: Being able to cook at home improves health and finances. 

Helping your kids understand how to manage money successfully means including them in your processes. Share your thought process and values around spending and money with your kids. Buying a new car? Talk about the choices you are making, the power of advertising, and understanding the real cost of borrowed money. Real confidence comes from experience. Give your kids a chance to learn and make mistakes now when it comes to money. You won’t regret it. 

Lauren Zangardi Haynes, CIMA, CFP (R) is a fee-only financial planner and founder of Spark Financial Advisors. She has three young children and a rambunctious puppy. Learn more about Lauren’s services at Spark Financial Advisors.
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