Raising Money Smart Kids

Helping kids plan for the future (especially with money) can feel like getting them to sit still before getting their blood drawn at the doctor’s office. That short waiting time can feel like an eternity to them. Yet, kids won’t learn how to make financial plans for the future until you teach them how to wait, plan, and save.

The biggest challenge to overcome is the fact that kids are spontaneous and impulsive. They see something they want, and they want it now!

Child development experts say that a key skill that kids need to learn to develop in order to succeed is impulse control. Kids who have hyperactivity, Attention Deficit Disorder (ADD), or Attention Deficit Hyperactivity Disorder (ADHD) have an even harder time with impulse control. Yet, all kids need to develop this skill.

A key area in which you can teach impulse control is financial planning.

How? By helping kids dream about and plan for what they really want to buy. For a young child, it may be a special toy. A child in elementary school may set the goal of buying a hand-held video game. A teenager may dream of buying a cell phone or an mp3 player.

It’s great for kids to have financial goals. Your role is to help them identify what they really want and then help them create a financial plan to get there.

In our family, we research what our kids want to learn about what the true final cost will be. That means figuring out the tax (and the shipping if it’s something they want to buy online). Then we break down their allowance (or if they’re working, the amount that they’re earning each week), to figure out how many weeks it will take them to save.

Sometimes getting to that step causes kids to change their minds.

Image via katerha on Flick’r

If kids don’t change their minds, they then discover that saving can take awhile. Then it’s important to help them place their savings in a safe place. Sometimes that may be a bank or a credit union account. Or it may be a piggy bank that’s kept in a safe place. When my kids were young, I offered to hold on to their money. That way they weren’t tempted to spend it. They could see it whenever they wanted (which they asked to do from time to time), but it was in a place where no one could take it.

Once your child reaches a savings goal, he or she will get a great sense of pride for accomplishing something big. Saving toward a goal (and getting there) is a huge accomplishment. As your child does this once—and then twice—and then again and again, he or she develops strong financial planning and saving habits.

Let them make mistakes. My kids have also planned and saved for something and then discovered they didn’t like it after they bought it. (If they had used the item, they couldn’t return it.) Let them feel this pain. You’ve felt it when you’ve had this experience. Don’t bail them out—even though they may have saved for months. Talk with them about how hard this is. Be compassionate, but also point out that this happens to people.

Then strategize about how to avoid this situation in the future. One of my kids began looking at reviewer comments more closely. Another one of my kids asked a friend if he could come over and try the video game that he wanted to buy. These are all great solutions, and they’re all great ways to teach kids how to spend responsibly, make financial plans, and succeed.

Of course, as an adult, I can get sucked up into that immediacy as well, especially if I discover something new that, well, I really want to get now.

So kids aren’t the only ones with impulsivity issues when it comes to money ; )

1. Bank It.

2. Kids and Money, Parentfurther.


Great post! If you want something goal-oriented, you may check out http://www.GoalsOnTrack.com, a very nicely built web app designed for tracking goals and todo lists, and has time tracking. It’s clear, focused, easy to navigate, worth a try.

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