People have a lot of opinions surrounding money: how we should spend it, save it, invest it; whether we should give our children allowances or force them to save every monetary gift received. I don’t know if there’s one right way to think about money for every family, but I do know that our schools don’t always have the time or resources to teach our children about personal finance.
As parents, we need to figure out the message we want to send to our kids and the money values we want to instill.
For me, it’s to make sure my little one feels empowered. When you empower someone, you’re helping them to feel strong, secure and confident about their own authority in controlling their life. Here’s the thing – I don’t believe in telling her how to save her money or telling her what she should spend it on.
I believe in giving her the tools to decide for herself what her money is worth and what she should be doing with it.
Does that sound interesting, but you’re not really sure where to start?
5 ways you can empower your kids to learn about money:
I wanted to share my thoughts on empowering kids to learn about money. These are the five things we’ve focused on that have worked well for us.
1. You’re never too young to start talking about money.
First and foremost, I believe that you should start talking about money while your kids are still young. I remember having conversations with our three-year-old about money. We were at our favorite ice cream shop, and we asked her, “would you rather share a double scoop with Mommy and Daddy and get to go get ice cream three times this month or would you rather get your own ice cream just for you but not get to go out for more this month?” She thought about it and decided more excursions to the ice cream shop were better.
My family loves to go out to eat. We’d go out for every meal, every day if we could afford it. But that’s not financially smart, nor is it particularly healthy. So sometimes we go out for dessert and share a bowl of ice cream among the three of us. It’s still fun, it’s still delicious, and it’s way more affordable.
2. Stop giving your kids everything they want.
I get it. We love our kids. We want them to be happy. We want to give them the world. Maybe we’re trying to give them the life we didn’t have. Perhaps we don’t want to deal with the backlash of saying “no” and frankly it’s easier to just give in. Maybe we want to help them fit in with their peers because life is hard, other kids can be jerks, and we want them to feel loved. But the problem with giving our kids everything they ask for is that we are ignoring the future implications. Maybe it’s easier right now to give in, but life down the road? Much, much harder.
When we give our kids everything they want, we are planting “entitlement seeds” into fertile soil. You might be familiar with entitlement if:
- You need to bribe your kids for good behavior
- You can’t get through the grocery store without picking up a treat
- Your little one refuses to help with simple chores/clean up unless there is an immediate reward
- Can’t handle you saying “no”
Child psychologists warn there’s a serious “entitlement epidemic” going on, but we can curb it by instead empowering our kids.
3. Let your kids earn money.
We are not allowance people. I don’t like the message that it sends, frankly, that she is somehow entitled to money just because, or that she needs to be paid to do simple chores that help keep our family running. We don’t pay her an allowance to clean her room, put away her toys, clear the dishes after dinner, or put away her clean clothes. But if she wants to earn money, we’ll give her a side job. Some examples are things like pulling weeds in the garden, helping stack inventory for our family business or organize shelves in the garage.
Sometimes she’ll clean out her gently used toys and sell them at garage sales or Facebook groups and keep all the proceeds.
4. Let them choose how to spend their money.
A big part of empowerment is letting your kids choose what to do with their money. Kids need the room to make mistakes so they can learn from them. And I don’t know about you, but I’d rather my six-year-old fail at managing her $20 than fail at 18-years-old with thousands in credit card debt. The first time she bought a board game at full price in a store and then saw a “like new” one at a garage sale was painful to watch. She was so dang upset. Big, ugly tears. But now? She asks us to search the Facebook buy/sell pages for the things that she wants. She asks if we can call local thrift stores and children’s resale shops to see if they might have a gently used and much cheaper version of the thing that she wants.
When it’s money that you’ve worked hard to earn, suddenly the price seems to matter a bit more. She’s learned that she doesn’t have to beg mom and dad to buy her things….she can have just about anything she wants if she decides it’s worth saving up for.
5. Teach them about opportunity cost.
We’ve found that teaching a young child about opportunity cost is often easier to understand than trying to teach them the “value of a dollar.”
An opportunity cost is what you give up when you choose something. Life is all about opportunity costs. Every time you select something – a spouse, a job, a vacation, a new toy, you’re giving up something else. By framing your decisions through the lens of opportunity cost, you get to compare two things and figure out what really matters to you. When I choose a family trip to Ireland, I’m giving up the resources that I could otherwise have spent on a new car or new tv.
My little one loves Peppa Pig and Shopkins. But, like most kids, she gets excited by lots of toys. Whenever she wants to spend her money on a new toy, we remind her that spending $18 on a new Barbie means she won’t be able to to buy two packs of Shopkins. Maybe the Barbie will win out, and maybe it won’t. But she’s learning that every choice we make means that we have to give up something else, and that’s a valuable lesson.
What does it look like when a kid is empowered with money?
Here’s a recent example:
Our six-year-old has been wanting a Peppa Pig house for well over a year. They aren’t cheap. But she really wanted it. Instead of begging us to buy it for her or throwing a tantrum in the store, she decided that since this was something that she really wanted, no one was going to stop her from buying it. She didn’t need anyone’s permission. She didn’t need anyone’s help or charity.
- Told us her goal and asked us to keep an eye out for it being offered at a garage sale or thrift shop. We did see one that was used, but it was missing pieces, and she decided she wanted a brand new one, even if that cost more.
- Asked us for ways to earn extra money. She pulled weeds. She restocked the shelves with inventory for daddy’s business. She saved up a gift card she received for her birthday.
- She talked herself out of buying anything else because the opportunity cost was too high.
Watching her confidently march into Target to pick out, scan, and buy something that she has wanted for over a year was one of my favorite moments as a parent. Even more special than the toy was her sense of achievement and ownership in the entire situation. It’s something I never could have given her had I simply bought the toy when she asked me for it months ago.
That sense of satisfaction and accomplishment is something that can’t be given and has to be earned.
What ways have you found to empower your kids to make better decisions about money? I’d love to hear them!