As featured in ‘hood Magazine
Birthdays are something every kid looks forward to year after year…mainly I think for the presents! As a parent, it can be a bit tricky to find the balance between the hottest toy and something that won’t end up in the corner collecting dust in a week. I know something I struggle with when it comes to gifts is hearing “I Want”.
How do we teach our kids about the difference between wanting and needing in our society that tells us we need all of the latest stuff…and we need it now! How do we teach them the importance of making smart money decisions that will help them build a strong financial future? Well, I have a couple ideas beginning with birthdays!
Learning to budget
In our household we hold pretty tightly to the concept of something to wear, something to read, something you need, something for fun. That means 4 gifts that we choose for them. As kids get older though they may prefer money and the opportunity to allocate those dollars how they see fit. This is a great opportunity to help teach them about smart money management. They have received limited resources, aka birthday money, and they probably “want” a long list of items, but they don’t have enough to buy it all. It is time for some tough decisions.
To start, a good rule of thumb for allocating their money is spreading it across 3 distinct categories – giving (10%), savings (45%) and spending (45%) …and don’t do it for them. Let them get out a calculator and figure the math out on their own. They can do it!
When it comes to the spending category it is important to let them decide how to spend their money. You may need to help them discover what really is important to them. Start with a list and prompt them by asking some questions:
- Is there an item your friend has that you always want to play with?
- What are you always checking out online?
- What is an item that could help you at school, etc.
Once you have the list then they are able to check their available spending $$ and most likely will find they cannot afford it all. They may quickly realize they would rather spend money on things they need rather than items they just want to have.
They may make some mistakes early on and spend money on things that end up being a waste, but those are valuable life lessons. If they can get the hang of this concept young, it will serve them well along their financial journey for the rest of their lives.