One of the more difficult jobs any parent faces is teaching their kids the value of a dollar. Sadly, some kids never learn that money doesn’t grow on trees.
It may seem cruel, but parents who aren’t afraid to let their kids spend their money on ill-advised purchases — especially those with limited shelf lives — are actually doing them a favor. Experience is a terrific teacher. So, with respect to personal finance, it’s better they err early when the impacts are relatively benign.
The bottom line: Those “wasted” dollars are money well spent — an invaluable investment in your kids’ personal finance education.
Photo Credit: klynslis
Is your son still without a bike or has he finally scrounged up the dough to fix those brakes?
I was wondering the same thing as First Gen!
My oldest son has definitely learned this lesson by wasting money on different ‘cards’. It is always so fun to open that new package of cards (be it baseball cards, Magic cards, whatever) to see if you get something really special. However, most of the time you end up with duds and duplicates, and regret.
Len,
I can cut it down to five words: Make them work for it.
The reason many kids today don’t appreciate the value of money is because they have never had to earn it. Our generation put up lemonade stands and had paper routes. But, most kids today receive a generous allowance for doing very little.
When I got my first job at 14, I spent almost every penny I made for the first 6 months. I spent the money on everything from eating out to CDs to video games, along with a whole lot in between.
Then one day I took money out of the ATM, and realized I didn’t have very much money left. I had worked hard for 6 months and had basically nothing to show for it. That remains one of the best money lessons I’ve ever learned.
Most children don’t appreicate the value of a dollar, because we as parents don’t want our kids to struggle. We want the best for them and in a way it spoils them.
When I was a child, I had the opposite problem: I was naturally a compulsive saver. I liked the sense of security — and the sense of possibility — that came from watching my stack of cash pile up, and so I never spent money. From my allowance at age 8, to wages from my first job at McDonalds at age 15, I saved. When I was 16 or 17, I opened my first mutual fund (I asked my mom to sign onto the account as an “adult chaperone,” but opening the fund was 100% my idea.)
I’ve learned a lot since then, namely:
1) It’s okay to spend here and now! The $15 that it took me weeks to accumulate when I was 8 years old aren’t really making a difference in the big picture. I should have spent MORE on myself when I was young!
2) On the other hand, thank God I started investing young! I’m way ahead of most of my friends of the same age.
They’re contradictory lessons … but they highlight the need for balance. Don’t tip the scales too far in either direction!
My son and I recently had a long talk about fads – related specically to silly bandz. He had to have more and more constantly. He spent his hard earned money on them and started wearing dozens at a time around his wrists. After a few months though, nobody cares anymore. Nobody wears them and kids are now on to the next big thing. So, he wasted his money.
Lesson learned? Fads, wasting money, hoarding large numbers of something that you only need one of? All a waste. Surely there will be more fads like this as he grows up, but it will sink in eventually.
Our oldest is 4 and a half, and we’re just starting to introduce him to the concepts of money. He knows that money is used to buy things, that I go to to work to make money, that coins and bills are money. It’s a pretty good start.
Agree. I have believed for some time now that we tend to teach our children many wrong things. One of these is that we teach them to save when actually it would have much more effect to teach them how to spend.
When my son, now in his 30s, was little he wanted a model dinosaur so badly. I had bought him a couple and told him if he wanted the toy, he could save up his allowance and buy it himself. It took him months but he saved and when he had the money I took him to the store. He bought it, played with it for a while and then it resided in his toy box. Some time later he came to me and confessed, “I really wish I hadn’t bought that. It isn’t as much fun as I thought it would be. But since I saved so long for it, I thought I must really want it a lot.” Lesson learned. Now he saves for the purchase but he thinks about whether he wants it longer.
My kid asks some money questions, and I answer them the best way I can to make him understand that money is earned the hard way, so he can realize its value and use it responsibly.
My kids have a banking account each. They also go to the bank and make deposits. It helps that their dad is the bank manager. Lots of free lollipops.
USAA Bank had a ‘First Start’ account program for kids, and I enrolled my oldest in it when he was 10. The kids got a monthly newsletter teaching them about money, saving and investing via a mutual fund focused on things kids love, like Coke and Disney. They were encouraged to email questions to the account managers, who actually wrote back! My son learned about compound interest, saving and investments, He bought a home at age 26 and has all debts but the mortgage paid off at age 34, all with no help from us. SO proud of him!
That’s fantastic, Lauren! 🙂
I wonder if there are similar programs like that still going on today.
Len, it seems like MOST banks & credit unions would offer programs like this for kids (i.e., their future customers!)