In this age of immediacy many parents have fallen victim to adage of “more is better”. According to T. Rowe Price's 2016 Parents, Kids & Money Survey, which sampled 1,086 parents of 8 to 14 year olds nationally and their kids, “nearly half of parents (46%) have gone into debt to cover something their kids wanted, and many say they spend too much on things their kids do not need (57%).” Amazingly, “58% most worry about spoiling their kids” yet still participate in unhealthy spending habits. The survey also stated that, “57% of kids have come to expect their parents to buy them what they want”.
Do you find yourself resonating with the results of this survey? If so, how do you break this cycle of overspending on your children? Here are five tips to help you combat the “more is better” mentality.
1.Avoid the non-essentials. Don’t go into debt to purchase something your child “wants” versus “needs”. Provide context to your children about the reasons why you can’t buy something they want and explain the thought process of your financial decisions.
2.Keep a close eye on your kids’ money and spending. Have some oversight on what your children are spending their money on (including money given to them as gifts). Talk with your kids about the difference between a “want” and a “need” and the importance of them saving for their future. Remind your kids of what they are saving up for.
3.Make allowances affordable, and age/task-specific. Giving your child an age/task specific allowance for chores will help your them make the connection between pay and work. According to New York City financial planner John Henry Low, assigning a dollar amount to a task or chore will “teach your child that money is an exchange”.
4.Do away with lavish birthday parties. The cost isn’t worth jeopardizing your family’s financial wellness. Consider planning a family activity with your child for his/her birthday versus a lavish birthday party. There are plenty of activities you can do that have a minimal cost. Check out our blog, Alternatives to Pricey Kids’ Birthday Parties.
5.Take advantage of teachable moments. Be open with your kids and discuss your family’s finances. T. Rowe Price encourages parents to invest in their kids' futures by talking to them about money matters weekly. According to their survey, “68% of parents who discuss financial topics with their kids at least once a week are nearly twice as likely to have kids who say they are smart about money”. The time you invest in money conversations will have a greater impact on your kids than any gift or toy you purchase for them.
Start good money habits with your kids while they are young. FamilyMint™ encourages parents and children to learn about money together. They also believe that the best teacher is experience, and with FamilyMint™ kids learn by setting and working to achieve goals they create themselves.