Teaching Your Kids Smart Spending

"Teaching Kids Smart Spending"

Smart spending, a great financial defence strategy

Smart spending goes a long way as we are faced with limited money resource and unlimited wants. For most people, we have more control over spending than earning. We get to make spending decisions all the time and making smarter decisions time after time adds up!

Smart spending is not about saving a buck or two here and there, it's about thousands of dollars which over time when compounded, can make the difference between struggling financially or being financially free. Your habit of spending on frivolous, non-essential, impulse items can lead your child to following suit and it all adds up.

There is an opportunity cost for every dollar spent. It makes sense to get it right and pass on the right habits to your child. It doesn't matter whether you earn $30,000 a year or $300,000 a year, what matters is living within your means.

Keeping track is a habit
It's normal for your kids to want things. Children nowadays get bombarded with manipulative commercials; and peer pressure does not make it any easier. When your child sees that his friend has a Play Station Portable, you know he will pester you for one.

Teach your child to be responsible and track his money. It's a lifelong habit that is good to start from young. Many adults live through their paychecks without having an idea where the money goes. Be a conscious spender. Keeping track of the type of expenses and getting into the habit of budgeting will improve money mangement. Get the worksheets to get your kids started now!

Teach your kid to use a shopping list
When you are shopping, it is a great opportunity to teach your kids. Show him how you plan for what you need to buy by having a shopping list of the needs and wants. Set a budget. Any leftover could be used for wants. If it is over the budget, you might want to eliminate the unnecessary items. It is easy to get distracted without a shopping list and chances are, you will blow your budget and end up buying wants more than needs. You might want to give your child a chance to practise. Back-to-school shopping is a great chance to get him to come up with the shopping list within a budget and go through the whole shopping experience.



Show him how you make purchase decisions
Point out the opportunities for comparisons and alternatives and explain how you evaluate when making a decision. We live in a world of more material options than ever in history. A tub of ice-cream can cost anything from $3 plus to $20 plus. It can range from vanilla flavor to green tea flavor. It can be very confusing for a child.

The most expensive may not mean the best quality and the cheapest may not be the best option, depending on the nature of the item, the usage and our priorities. For example, I am willing to pay more for a well fitted classic dress than a fancy trendy dress since the trendy dress will be out of the wardrobe within the year whereas I can wear the classic dress for years as I have a consistent figure.

Different places sell things at different prices. When doing grocery shopping, it usually makes sense to shop at a place that offers better prices. For bigger ticket items, you might want to do more research. There are many forums online for specific product interest that could be helpful. Show your child how he can do that when he wants to buy a camera or a mobile phone. Shopping online can mean considerable difference in pricing too.

Consider brand names and their quality and explain to your kids. You might be more brand conscious on certain products and less when it comes to others. Does the quality and projection of image justify the price difference or are you just paying part of the product's marketing expense?

Live within the means
It is imperative to teaching your kid to pay himself first and living within or below his means. I have seen so many friends including myself in the past earning $30,000, $50,000, or even $200,000 a year and spending all or even more. If a teenager or young adult gets a credit card and spend more than he has by treating the credit card as an additional source of money, he will be in trouble in no time. Living a lifestyle that doesn't belong to one is almost always the cause of money distress due to credit card debts. Therefore it is always a good thing to teach your child about credit cards before he goes to work in society and apply for cards. If otherwise it will be liken to him having a sports car without knowing how to drive.

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About the Author

Jean Victoria Tan

Copyright 2008 Jean Victoria Tan Jean Victoria Tan is passionate about financial education for children. She teaches financial literacy to...