In all of history, no children have had more money of their own, have had more pressure to spend it, and have needed more guidance on how to do it than the kids of America in the early years of the 21st century.
The challenge of parents today is to teach restraint and responsibility in a society that doesn’t put much for those traits. Janet Bodnar’s book, “Raising Money Smart Kids” can be a great help. Among all the practical advice on allowances, family chores, teen employment, etc., Bodnar also features examples of how parents should answer “tricky” financial questions kids ask.
The following are just a sampling from her book:
Q. Dad, can I have $15 for a new CD? Mom says no, but all the other kids have it.
A. Tell your child that if Mom (or Dad) says no, the answer is no. There are lots of other issues here—whether you can afford the $15, whether you should cave in to your child’s peer pressures, whether you child should be buying the CD with his or her own money (all of which are covered in this book), but in a situation like this, your most important consideration is to stand by your spouse. If you do, chances are you won’t hear this question again. If you crack, your action (and your child) will come back to haunt you.
If you disagree with your spouse or if your child is exploiting a sore spot between the two of you, you and your spouse should talk it over afterward to agree on a response. But this is one discussion that doesn’t have to take place in front of the children.
Q. How come my friend Christopher’s allowance is bigger than mine?
A. Resist the temptation to tell your kids that Christopher’s parents must have more money than you do. Your income should be the only factor, or even the main one that determines your children’s allowance.
Tell your kids up front that their allowance will be based on three things: how much you can afford to give, what you expect them to pay for, and how much money you think they can comfortably handle. If they bring up the subject again, you have a ready-made reply to rattle off.
Q. I have $35 in my piggy bank. Can I spend it all on a building set?
A. Let your kids spend their money, even if you think they’re blowing it all on one over-priced toy. If they have exercised the self discipline to save in the first place, they deserve a reward.
Parents should certainly retain some veto power over how children dispose of their own money. You may not want them to have inline skates, for example, because you think they’re too dangerous, or a video game system because you don’t want them to be parked in front of the TV all day.
But price along shouldn’t be the deciding factor. Even if the coveted item is expensive relative to your children’s allowances, let them splurge so long as the purchase is otherwise suitable.