One of the most common causes of financial bleeds is kids. You might think little kids are bad, but the older kids get, the more expensive they become. Kids can totally suck the life out of your finances. Don’t fret! Here are five ways you can help your kids understand money and treat it with respect. (Instead of relentlessly asking you for tacos and donuts and driving you nuts.)
1. Watch Your Language
Watching your language goes beyond preventing the occasional swear word. You don’t want to blame every single time you say no to them on money. This sets them up for a lifetime of money issues when they become adults.
If your child says , “Mom, can I have a donut?” or “Mom, can I have this [insert must have item here]?” Instead of saying, “No, I don’t have the money for that.” You want to say, “That’s not a healthy choice” or “That’s not a priority for us right now.”
When you tell your child you don’t have money for something they want, what you’re really doing is putting the control on the money. Even if the real reason is because you’re strapped for cash, you need to take control of the situation. We know you don’t want to tell your child no.
You want them to be happy, but telling them they can’t have something because you don’t have the money is detrimental to their Money Mindset. When you blame the money, your child hears that their family is poor and scarcity starts to set in.
If their request is denied because you don’t have the money, you can use this as a teaching moment later. When you are home, you can talk to them one-on-one and explain why the purchase couldn’t be made.
Take ownership of your “no” and get away from blaming every single denial of their requests on money.
2. Set Boundaries Around Activities
This isn’t just about money, although money should come into it. I see kids activities derail financial situations all the time. It’s much less about the price of the activity and more about the pizzas that get ordered because you went straight from school, to homework, and then to soccer practice. You didn’t get home until 7:30 PM and nobody took the meat out of the freezer to defrost.
It’s about the amount of time, the amount of nights, and the amount of travel that goes into each activity. The busier you are, the more involved you are, the easier it is to spend money. I’ve seen tremendous financial derailments around sports that require a lot of travel, like hockey or cheerleading, or a lot of materials, like football pads or uniforms.
At the beginning of the year, set some boundaries around the activities. If the kids are going to be involved in activities, how many nights a week can they be involved? Is your family able to travel? How much are you willing to spend?
Very often, this is where the jam up happens. As the kids get bigger and more involved, they travel with their sports. Now, you’re paying for transportation, a hotel, and dinners out. You’re doing all this stuff and you would rather be home folding your laundry.
Parents really love their kids and they want them to be involved, but the cost is detrimental. They get stuck when they feel like they have to take it away from their child. They don’t want to feel guilt, so they do it anyways.
It’s okay to set boundaries on a child’s activities. They’ll get far more out of concentrating on one activity you have planned for than several you don’t have the time or money to commit.
3. Set A Budget and Let Them Choose
Depending on the maturity of your kids, you want to set a budget for the things they need. My daughter asks for clothes every single time she talks to me. She’s like, “Mom, I don’t have anything to wear.” That’s not true. She’s never naked. There are clothes in the laundry. There are clothes on her floor. There are clothes everywhere. I know she’s got clothes.
You can start to prepare them by setting a seasonal budget. You might want to say, “Hey, you’re going to get $200 in August to buy your school clothes” or “You’re going to get $100 at your birthday”.
The point of this is to let them have some freedom of choice and to understand the way money works. They’re not going to get something every single time you go out, but they can have some of the things that they want. This creates a balance.
When it comes to clothes shopping, I give my daughter a budget because she is much more careful about what she gets. She buys things that she likes a lot more than when I just take her and swipe the debit card for her. It’s a whole different method of shopping where she’s in charge of her boundaries.
4. Freedom and Responsibility Go Together
When kids get into high school and beyond, the expenses go bananas. Now there’s a car, gasoline, car insurance, college spending money, and the ability for teens to cost a ton of money.
You want to think about these things in advance so when the time comes to pull back, you’re not pulling the carpet out from under them. For example, when the kid first gets their driver’s license, you may offer for them to use your car. You can tell them that they must pay half of your car insurance if they want to drive.
Car insurance can be expensive. Your child needs to know this. If asking them to pay half isn’t reasonable, pick something that’s reasonable for them to be able to achieve. Freedom and responsibility go together.
When you give the kid all of the money to have all the freedom, but they don’t have to carry any of that responsibility, they become dependent. They’ve never had the opportunity to manage their adulthood.
If you’re going to pay their car insurance, you want to have a timeframe for it to taper off so they can carry that responsibility on their own as an adult. The same thing applies if you’re going to make their car payment. Well, great. How long are you going to do that for? Are you going to do that forever?
If there’s a cutoff point, you should tell them in advance. Don’t surprise them. A lot of times we put these things off because we think we can do it all and then we can’t. Then we pull the rug out from under the kids and they’re totally unprepared as young adults.
5. Talk to Them About Money
I ask a lot of people, “What did you learn growing up about money?” I’m going to tell you, most of them don’t know. They didn’t know how their parents were doing until they were well into adulthood.
If you have the opportunity to have a teaching moment about how savings accounts work or why you would save money, sit your kids down and have that conversation. Even if you made a mistake and you see that you made a mistake, fess up to that with your kids. Having those conversations, those real candid conversations around money, helps somebody who’s growing to understand the way that it all works.
Most people have a very taboo stress oriented talk on money. The kids have no idea what’s going on. Of course they asked for 9 million things. They’re kids. That’s what they do. If they have a better understanding, they can understand you saved money for this reason, or “Hey, I know my parents are in this spot financially.”
They can gauge based more on reality. It doesn’t solve everything. They’re still kids. They’re still going to drive you nuts. They’re still probably going to suck the life blood out of you. But these are some of the things you can do to mitigate damages.