When parents describe their kids’ money habits to me, they quickly label them as a money spender or saver. One mom says, “He can’t wait until he gets money.” Another tells me, “She just enjoys having money.” While parents easily identify these spending habits and accept them as typical childhood behavior, is it a good idea for kids to grow up with a money spender or saver mentality?
Let’s fast forward to adulthood where adults cannot spend at will nor hoard their money. Sooner than you think your kids will become adults who are legally responsible for their finances because they must pay their bills.
We all know adults who can’t balance paying bills and building a savings or retirement fund during their working years. An adult commented that his parents required him to save a percentage of his money, but saving didn’t teach him anything about managing money or paying his bills.
What can parents do during the childhood years to help their kids be more successful managing their money in the future?
Money spender and saver motivation
A spender buys and acquires stuff. This is understandable because what good is money if one can’t use it? Unfortunately, as adults, going with all spending and no saving does not work well in the short or long term.
On the other hand, a saver revels in accumulating money. This is also understandable until the bills start rolling in. Also, some people continue to save money and don’t use it for themselves at all.
Kids and adults think of saving differently
When helping kids learn to manage money I define “saving” as “the act of not spending.” In the adult world, we call this deferred gratification.
When kids control the decision to spend or not to spend they get hands-on, real-time practice with deferred spending. However, for kids to understand this deferred concept, the saving and spending actions need be relatively close in time.
Saving for a long-term goal like college is in the hazy future. The saved money is out there somewhere for something they can’t even comprehend. Whereas, the decision to not spend this week’s money so there will be more for something next week is quickly rewarded.
Because kids have few expenses, they have the freedom to be an money spender or saver as they want. But as parents we somehow expect them to emerge from childhood with the ability to balance spending and saving as we must do.
Helping kids balance spending and saving
A strategy as explained in The No-Cash Allowance puts kids completely in control of their own money. The money is a fund to be used for both fun spending and real expenses. Kids receive funding from parents while being expected to pay for some of their expenses.
By being required to pay for certain things kids must adjust their money decisions. Kids learn to manage their money to meet the current situation. They are required to think about their money decisions, “Should I spend this now? Will I have enough for next week’s expenses?”
Kids learn to save in a way that lets them enjoy the reward of their decision in a relatively short time span. Kids also learn to anticipate the future and plan for it.
Start now to help the spender and saver
By giving your kids some age-appropriate expenses, both you help both the spender and saver. Kids gain experience and confidence meeting their financial obligations while having money to spend for fun.
As parents, you will be surprised how your kids’ attitudes about money will change when you turn the decisions over to them.
For more tips for parents about saving visit America Saves. You and your kids can use some of these ideas to make your dollars stretch further. Knowing when to be spender or saver can make all the difference in your financial world.