The holiday season is now behind us, along with memories of familiar foods, family and … debt?
With the National Consumer Council (NCC) reporting that more than 1.3 million Americans declared bankruptcy in 2001 – the majority being personal bankruptcies – there is no better time to strategize about family finances. Parents must take the opportunity to teach monetary skills to their children or they may pay for it – literally – in the future.
Start them early!
As soon as kids learn to count, they can tell the difference between simple coin denominations of pennies, nickels and dimes. Have them sort and combine these numbers to start teaching necessary math skills. Children, little sponges that they are, are most disposed to learn money skills from watching their parents, just as they learn simple “norms” like how to bathe or eat.
Seeing money spent frivolously, they learn frivolous spending. Similarly, if they see Mom and Dad using coupons and watching for sale items, comparing prices and openly discussing how family money is spent, then children will learn more careful, thoughtful habits.
Start with money basics, because children do not innately understand concepts such as budgeting with limited funds. But a child as young as 2 can discern the similarity between her “piggy bank” and your bank. Take the kids with you when you make a deposit or open a bank account together. If you have a valuable under lock and key, show your kids the shiny vault where grown-ups keep “treasure.”
Play store with young children and show how exchanges of money are made. Personally demonstrate how charitable giving can both make you feel good and serve a practical humanitarian purpose. Let them use real money to make their own purchases and mistakes.
Take them to a discount store (or let them choose from your own “store” of inexpensive prepurchased items) and let them choose whether to buy something with long-term enjoyment, like a puzzle or card game or an easily breakable toy. Talk objectively about the items to illustrate differences between quality and quantity. Offer the choice of saving the money, using the moment to explain saving as a form of delayed spending.
According to the NCC, in 2001 almost half the households in America reported difficulty making minimum monthly payments, shelling out more than $65 billion in interest. Parents can help children avoid the high interest trap.
As kids get older, have them look at a financial statement to demonstrate how interest works. Explain that paying with credit isn’t “free” and carrying a balance makes items costly. Show them “junk mail” solicitations for new cards and what you do with them. With regards to spending, parents should know that when kids decide to make a purchase they often do so with little thought to their other resources.
Former Vanderbilt University professor and current Massachusetts Instititute of Technology professor Brian J. Gibbs says that it becomes harder to resist a reward as it gets “close,” either in physical proximity or by a temporal desire spike (like an upcoming birthday or just having seen an enticing commercial).
Alert kids to such emotional “hot buttons,” helping them become consumers aware of outside forces pressuring them to go for smaller rewards rather than waiting for the better thing.
When shopping with kids, whether for groceries or other items, show them how the same item can cost more or less, exemplifying how they can stretch saved money to buy more if they shop carefully. Make a game of seeing who can get the best value for the least money. Encourage kids to not blow all their money in the first store, but let them know that they can also go to a store with the immediate intention to purchase provided they have done their research on the item ahead of time.
By doing comparative shopping (including watching ads in media) and going home to think before deciding what to buy, you teach careful spending and let kids experience the excitement of delayed gratification.
Want Versus Need
American Demographics magazine estimates the average child sees 20,000 – 40,000 advertisements yearly. How do parents counteract this barrage of influence from television, radio, the Internet, and print? Further, according to James McNeal, a marketing professor and author of numerous books on consumerism, millions of children younger than 13 directly influence the spending of their parents.
To maintain common sense spending habits for all members of your household, discuss want versus need with your children.
Ad marketers actually encourage “nagging” in order to reach parents’ wallets. Talk about ads with your children. When a popular TV show runs ads promoting related toys, ask your child if this makes him want the product, to show how marketing manipulates emotion. When a commercial uses tricks like slow-motion, sound effects and music to create the illusion of an “ideal reality” where family fun and winning are guaranteed, point it out.
Discuss the allure of celebrity/character endorsements and point out how sneaky product placement affects the ethereal “cool” appealing to teens. Make kids aware that ads are designed to persuade and are not purely informational. Muting or skipping past commercials is a simple way of reducing the cummulative impact of ad exposure; many parents like to use commercials for discussion with kids.
My 4-year-old recently said that adults are rich and can buy anything they want. This presented a golden opportunity to talk about how Mom and Dad make money-spending choices every day. We chose to use a set amount of money to buy a house, a safe car and some nice toys, but not necessarily every toy we want.
We can’t eat out every night. We reminded him about how we made “extra” money for a family vacation when we had a garage sale which he remembered and enjoyed. We asked if he would like to sell some of his stuff in a sale so he could make money for something special. Consequently, he independently evaluated his wants and needs.
Talking about basic choices and money limitation invited him to become more involved in family choices. It’s in day-to-day living that little opportunities for spending lessons come up. Parents can share these moments with their kids, creating an open and supportive environment where savvy consumerism – and not lecturing – rules.
Jen Smith is a freelance writer and compulsive proofreader, known as Mama to a traveling sideshow of two boys and a sheltie.