Cash can be a popular present for children when birthdays or other celebrations roll around throughout the year. But instead of letting your youngster splurge on candy or other impulse buys, set them on the right foot by helping them come up with a plan for their money.
While it may be enticing to teach your child to save their money by depositing it all in a savings account for them, consider taking the opportunity to teach them how to develop good spending habits.
Here are some simple spending habits to teach your child when they find themselves with money that’s burning a hole in their pocket:
Wait a week. Whether it’s a gift card or cash, ask your child to wait seven to 14 days to consider how to spend the money. Don’t restrict how they can spend it, just require a waiting period.
This can help them avoid an impulse purchase, which they may regret, allowing them to instead focus on something they truly want. The goal here is to teach a financial lesson that will help them appreciate money more.
Create a wish list and go shopping. During the waiting period, ask your child to write down what they want to buy. From there, if they’re old enough, you can show them how to look up prices online in order to find the best deal. You may end up buying the gift they want at a physical store, but don’t take them shopping just yet. Instead, do some research on your own first so that you can avoid impulse buys while at a store. Once the waiting period has passed and you and/or your child has found the best price, go ahead and buy the item.
Save some of it. While this isn’t necessarily a spending habit, getting into the routine of saving can be a good strategy when receiving some unexpected cash. Putting aside just 25 percent of some gift money"such as $5 out of $20"can help children learn about saving for long-term goals.
If you’re saving for retirement or have a savings account of your own, sit your child down and explain how it works and how you’re saving money to retire someday or for some other goal, such as buying a car.
Be a good example. When shopping, be careful about impulse buys, utilize credit cards correctly and shop around for the best price. Following these financial habits"and others"will provide a good example for your children and show them that you practice what you preach.
Lastly, talk about your spending decisions as a family, setting priorities for your money. Show your children that any money they get"and especially money they receive as a gift"is worth careful consideration of how it’s spent.
Published with permission from RISMedia.