In talking with parents, they usually start by telling me about their spender or saver kids. There’s good reason for parents to recognize their kids’ money behavior. It now appears that this may be more significant for the kids future than previously thought.
Recent research shows the role that emotions play in spending behaviors. Surprisingly, even kids reliably report their emotional responses when given a choice to spend or save.
A University of Michigan study found that children as young as five already had distinct emotional reactions to spending and saving money, and that these translated into actual, real-life spending behaviors. The findings also suggest that these emotional reactions and spending behaviors weren’t modeled after their parents.
Behavior of spender or saver kids
The spenders (aka spendthrifts) are those kids who can’t wait to spend no matter what, buying something just because. They don’t experience emotional pain, tend to over spend, and may carry more debt as adults.
The savers (aka tightwads) feel emotional pain when spending, may not want to spend their money, and may have less debt as an adult.
All saving is not the same
Saving is simply the act of not spending one’s money. Yet when kids hear family talk about saving they may be confused because how and why adults save is different than a kid’s experience.
As my husband tells me when I show him how much I saved while shopping, “You have to spend money to save money.”
When looking at long-term saving, not spending now helps build a fund for a down payment or retirement, This is a deliberate act of not spending now in order to have money to spend in the future.
Kids don’t earn a living, don’t have to pay living expenses, and have considerable freedom spending their money. As a result, they don’t face the pressures of real-life events when deciding whether to spend or save. For them life is good as they are learning to manage their money in childhood.
Requiring kids to save
Providing allowances to kids then requiring them to save a portion leaves them out of the decision loop and takes control of their money out of their hands. Consequently, spenders may end up deciding the money wasn’t theirs anyway, while savers will be quite okay saving as instructed because of their reluctance to spend.
Influence spender or saver kids’ behavior
Recognizing the role of emotions about money for spender and saver kids is important for parents to influence their kids behavior before they become adults. Talking with the spenders and savers about their money decisions can create constructive money talks in families and help kids gain confidence in their choices.
In the end, we aim to manage money wisely to make our lives comfortable and fulfilling. Yet, we all know people who spend on fun and can’t figure out how to support themselves. We also know others who spend too much in one area, for example, spending excessively on gifts for others at the expense of their own needs. Creating the balance between spending and saving is one of life’s many challenges.
The use of money is all the advantage there is in having it.
~ Benjamin Franklin
In creating a hands-on financial education for your kids in your home or homeschool you can set some guidelines that will influence their behavior. By creating kid-size real-life situations you can help them balance those spending and saving habits.
Require kids to track all their money as a number in an account they are responsible for maintaining. Make them see their money as numbers.
Give them age-appropriate expenses with responsibility and control. This makes spenders and savers use their funds to satisfy their financial obligations, creating a sense of responsibility. Buy school supplies
As kids see their account balances rise and fall because of their decisions and responsibilities, they will be getting a child-size experience of the adult world of money. Parents tell me how amazed they are at how capable their children are when it comes to managing money and making decisions. Start now to prepare your kids for their adult financial future.
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Lynne Finch helps parents teach their kids about money from their first allowance to online banking. “It’s time to teach the kids how to manage money they can’t see or touch,” says the author of The No-Cash Allowance. Follow Lynne’s common sense approach for teaching children that money is a number with kids as young as pre-school and continuing through high school.