‘Tis the season for increased spending. During the holidays, we tend to exploit our credit in order to appease our children with things that will be outdated or forgotten by next Christmas. Instead of adhering to our budgets, we splurge on non-sustaining things that make our children smile, and in doing so, we teach our children a poor lesson in money management.
In her book, Our Black Year, Maggie Anderson reports, “Black teens … spend 20 percent more a month than the average U.S. teen, especially on the categories of apparel, video game hardware, and PC software.” Yet their parents, according to the U.S. Census Bureau, earn less than whites. What lessons are we teaching the young ones in our lives when we spend more than we earn?
In order for our children to be economically responsible adults tomorrow, we must teach them the concepts of saving, using credit modestly, and budgeting today. The strategies below will help you do just that.
Learn the power of earning
Children tend to cherish the things they earn. For example, the child who saved for a laptop probably cares more for the laptop’s maintenance than the child who got it as a gift. With this in mind, have your children earn their money instead of just receiving it. For example, instead of giving your child an allowance, have him earn the allowance by basing his pay on the work he or she does. You can give your children cash for maintaining an impressive GPA or completing household chores in a timely manner. Even if you do not give your children an allowance, they can still earn money by completing tasks for family members or your friends. By earning money instead of just receiving it, your children will learn the important lesson of waiting for a consistent income instead of finding a way to get fast cash.
Identify wants and needs
Prioritizing is the key to avoiding wasteful spending. So talk to your child about appeasing their needs before their wants. First, help your children distinguish between a “need” and a “want.” Have your children brainstorm a list of “needs” by asking them questions, such as, “What must you have to live?” and “What would be extremely uncomfortable to live without?” This should help them see that things like shelter and food are needs, which are also directly tied to your family values. So depending on the family, some needs may include tithes and/or education.
Then discuss “wants,” or things your children can do without, such as a Coach Purse or Blu-ray player. Discuss the ways that you prioritize your spending, by first paying for need-based items and then using what you have left for “wants.” Next, give your children a mock budget to help them determine the way they can meet all their needs and still have some money left for a few wants. Repeat the last part of this activity periodically in order for students to prepare for future budgeting.
Set a savings goal
Some children run to a candy store or clothing outlet the moment they get any cash in their hands, and they never learn the power of self-control when it comes to finances. Help them set and achieve a savings goal. Increase their motivation to save by having them determine something to save toward, like a gift for dad or a donation to their favorite charity. Next, have your child determine the amount he or she expects to put aside each week or month toward the savings goal. The general rule is to save 10-15 percent of what you earn. Finally, have your children determine where they should save (i.e., in a shoe box, special piggy bank, or at a financial institution). Hold your children accountable for the amount they agree to save, and have your children check their savings periodically to make sure they are meeting their goal.
Finance lessons online
Resources are available to help your children understand financial topics, such as saving and spending, earning money, and using credit wisely. Older children will enjoy reading the short informative articles and completing activities on managing their money at Consumer Jungle (consumerjungle.org). To help younger kids find engaging information on being money smart, have them explore the PBS Kids: It’s My Life site (pbskids.org/itsmylife) and click on the “money” link. There they can read, play games, and complete activities related to money management.