Raising your children to be financially responsible is a common challenge for many parents. And it’s an especially arduous task when it comes to handling gifted money received for birthdays, holidays or other special occasions.
On those occasions, children are often compelled to spend their money as quickly as possible on things that they momentarily want, even though prudence would help them stretch their dollars further and develop smart spending habits that can be carried into their adult lives. That’s why parents play a crucial role in helping their kids practice mindfulness and teaching them how to manage their gifted money well.
With that in mind, here are four strategies parents can use to impart important money lessons about spending and saving.
[See: How to Talk to Millennials About Money.]
Put a moratorium on gift card spending. Simply instituting a waiting period for spending gifted money and gift cards and directing your child to wait seven to 14 days to carefully consider how to spend the money can go a long way. Don’t focus on restricting how children spend their money. Instead, institute a waiting period. This gives your child a chance to consider what he or she actually wants to do with that money, and encourages him or her to purchase an item that is valuable and long-lasting, rather than buying an item on an impulse.
[Read: 5 Scary Facts About Financial Literacy — and How to Avoid Becoming a Statistic.]
Discuss the difference between wants and needs. While shopping with the kids, take some time to talk about impulsive spending versus planned purchases. Give concrete examples of unnecessary things you might buy on an impulse, such as expensive clothing and jewelry, and then talk about why you don’t buy those items often.
Then, give your kids some clear examples of planned expenses, such as items from your grocery list. Emphasize how you carefully considered those purchases in advance and how they fit into the things you want to do later on, not just that they are tempting in the moment. And make sure to stress the benefits of saving strategically. For example, you might highlight that by spending less on toys or clothing now, you can help finance a vacation next summer.
Outline potential spending strategies. It’s a smart idea to sit down with your child and have him or her make a wish list with their desired items to purchase with the gifted money they received. After your child makes the list, talk through each of the items and help him or her determine the ones that will last the longest and provide the most joy.
Once your kids have narrowed down their spending targets, you can share smart methods for finding bargains for the items they want. Rather than going to the nearest store and buying the item, you can show your children how to look at prices at a number of places using the web, and then buy the item from the retailer with the best prices based on competitive research.
Be a positive example. The best thing you can do in terms of nudging your children toward being frugal with their money and encouraging healthy financial habits is to be frugal yourself. Practice what you preach, and practice it even when you’re not preaching, because your children are watching. And be careful about your own impulse buys. Set the right example for your kids by planning ahead and shopping around to get the best price. And don’t be afraid to think out loud and talk through your spending decisions as you work toward a cost-effective outcome.
[See: 9 Money Mistakes Parents Make.]
Teaching your children how to be smart with their money starts with you. Be mindful of how you budget and manage your finances and use the actions you take as an example and teaching tool to help show your children how to be more effective with their dollars.
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How to Teach Kids to Be Frugal With Gifted Money originally appeared on usnews.com
