By: Gaby S. Dominguez
The goal of Confident Kids℠ is to help parents and grandparents help their children and grandchildren learn how to think about money, i.e., how to save, how to invest, and how to become financially responsible, not only as children but as teenagers, young adults, and eventually as parents.
With the Holiday season upon us, many kids are anxiously looking forward to opening their gifts, whether they are toys, clothes, electronics, or good old fashioned cash. Just as parents teach their children how to put their toys away when they are done playing with them and how to protect their electronics from being damaged, parents also want to teach their children how to properly manage the gift of cash they have received. For most kids, it is enticing to spend all of the money in one fell swoop, especially on that toy or article of clothing they are dying to have. However, this is not always the wisest decision.
Below are four tips that you can use to help teach your children how to think about the money they received this holiday season.
Begin a habit of spending money on needs, not wants.
The senior CERTIFIED FINANCIAL PLANNERS in our firm, W. Kirk Taylor, CFP® and Mark D. Troutman, PH.D., CFP®, advise the firm’s retirees to think of their cash flow needs in retirement at two distinct buckets – need & wants.
The desire by your child to spend ALL of their fresh cash at once on a single toy, like the new Space Jam “Shoot & Dunk Playset” featuring Lebron James¹, or a skateboard, or iPhone is tremendously high, especially when your child has wanted that toy, skateboard, or iPhone for a while. This is a natural, yet emotional response.
With that being said, it is essential for your children to start a habit of thinking about spending more on their needs instead of wants, but it is favorable to sometimes have a beneficial balance of both. To break the cycle of focusing exclusively on their wants, have your children think about exactly what they are spending their money on, therefore steering their mindset to what is more worthwhile rather than tempting. A great idea would be formulating a pros and cons list to decipher if your child is making a good decision or acting on their impulses². An example of some pros about a desired toy or item may be that it is productive, affordable, safe, and will be used more than once. On the other hand, some cons would be that it is expensive, dangerous, hard to take care of or manage, and will eventually be discarded or forgotten about. Additionally, ask them to think about necessities they may be lacking, such as clothes, school supplies, or food, i.e., their needs, instead of motivating them to spend money on toys or other extraneous items, i.e., their wants.
Allow them to spend some money but save the rest of it.
Your children deserve the money that they receive during the holidays, but it is not beneficial to allow them to spend it all, especially at once. Give them a portion of what they received to freely spend initially but put the rest aside to serve as their savings. You can either give them bits of it to spend along the way, or keep it saved for important life events or needs, such as school, toys, shoes or clothes, and hobbies or sports.
Consider opening a savings account for your children.
It is always a rule of thumb to start saving as early as possible. Therefore, it is never too early to open a saving account for your child, so they can fully benefit from the accumulated savings in the future. You will not be just setting the foundation for their success, but you can use this as an opportunity to teach them the principles of governing proper saving and spending. Also, this is a wonderful opportunity to teach your children how a passbook savings account works and how to deposit and withdraw money. Think about dividing the gift – some in cash, but the rest a deposit in a savings account or mutual fund.
Be a role model.
Despite the advice or instruction you provide for your child, the most crucial factor that will impact them is your personal example. The best way for your child to understand the concept of money is by watching it happen explicitly from you, the person they admire and respect. Show your children how smart you are about money. Involve them in the basics of budgeting, spending, and saving. All in all, practice what you preach to them if you want to the lessons to stick.
The holiday season is a time to cherish and enjoy but can also be a fruitful time to educate. Utilize the excitement your children have about the holidays by teaching them positive financial habits that can positively affect their future. By adding a splash of fun to a usually tedious lesson by enticing them through the involvement of their gifts and the holiday season, your children will become more knowledgeable, skillful, and financially aware! ■
 Moose Toys Space Jam: A New Legacy – Super Shoot & Dunk Playset with Lebron Figure, Multicolor (14568), Amazon April 18, 2021, https://www.amazon.com/dp/B08GD1D3JK?linkCode=ogi&tag=goodhousekeeping_auto-append-20&ascsubtag=%5bartid|10055.g.35901260%5bsrc|%5bch|%5blt|sale
 Teach Your Kids To Spend Their Christmas Money Wisely, The Asian Parent 2021, https://ph.theasianparent.com/kids-spend-christmas-money-wisely