27 June 2011

Determining your child's relationship with money.

IMAGINE this. A child walks up to the counter of a toy store, mum in tow, to ask the price of his chosen item. The shop attendant replies $24.95. The child's face drops, he swings around to his mum and says, "But I've only got $20." Never fear, supermum to the rescue, she contributes the extra and tells her son, "You can pay me back." What is the lesson this child is learning about money?

This scene happens daily in stores across Australia, and no doubt the rest of the Western world also. While it seems simple and harmless enough, it may be setting your child up for a bad relationship with money.

Another similar scene in stores that cater for children goes like this: child wants to buy item they like.  The parent suggests the child to resist the purchase and instead save their money so they can afford a better, more expensive item. Child declines. Parent pleads with child to not buy item/s but to save up for bigger, better item. Child declines. Parent then tells child they are not spending their money today, they will instead save it for a bigger, better item. Whinging, whining, crying, screaming ensues. Then either:
a) parent buys item/s for child so child can save their money or 
b) child leaves with parent only to return and purchase original item/s or 
c) child buys item  but parent continues to tell child they  made the wrong choice and should have saved for a bigger, better item. 
What do  these scenarios teaches a child about money? 

When I was a child we were broke. So broke we couldn't afford a car. Instead my dad would ride a bike to the supermarket and complete multiple trips to get all the goods home. His carrying capacity was limited to  filling a  basket on the front of the bike and milk carton on the back. 

As a child I remember mum would get incredibly excited on pay day. Dad would get home with a little yellow envelope and hand it to mum, who would then pull out her "bills" book. She would put aside whatever money needed to go towards due (or overdue) bills, put aside some money for the groceries, and the either: 
1. Do a little dance and sing a song because there were leftovers to spend (waste)
2. Yell at dad for not earning enough (if the bills amounted to more than dad's pay). Then cry.
Option 2 was the most common. Option 1 only happened around tax return time.

What did this teach me about money? Until just a few years ago, on pay day I would pay any bills due immediately and then go to an ATM and withdraw the rest. I would then put aside my share of the shopping budget and then spend the rest. If I didn't have enough money to cover bills AND waste on luxuries, I would get angry at myself for not earning enough. Sound familiar?

So if you "chip in the rest" for a purchase your child can't afford, stop to consider what you may be setting yourself and your child up for: your child lending money from you (frequently) or your child racking up debts by buying things he/she cannot afford. 

As for making your child save for something bigger and better? There is definitely merit in this, but pre-planning will ensure success. Throwing the idea at them on the day they have chosen something else (especially if they are in the store holding it) is not great planning. Also, if your children see you saving for bigger, better things then they may be more likely to copy. Don't preach to them a "do as I say not as I do." 

Four quick tips for teaching your child about money (adapted from a money-savvy eight year old):
1. Buy only when they have enough money.
Don't chip in on the spot - make them save for it. 
2. To help them save for the fun things they really want, make sure they can see the money.
Let them save the money in cash or write their balance on a whiteboard or piece of paper on the fridge. Make sure it is something THEY want or else they will have no real desire to save.
3. If they need more money, find a way for them to earn it.
Of course it is age dependant what they can do for more money but naturally they should not receive money for things they should do, like "brushing their teeth" or "eating their greens." If you pay them for doing these sorts of things, what motivation do they have to do them without pay?
4. Find ways to have fun without spending money.
Yes money is great and brings convenience but it is not everything.

What lessons about money are your children learning from you?

1 comment:

  1. I know this kind of goes against a lot of strange beliefs in the western cultures but my parents refused to help me purchase my first car. They didn't contribute to buying, fueling or registering it and I am very thankful in the long term that they did this.

    The idea of course, was that if you did not work hard for the money you needed to purchase that dream car, or at least some kind of car, you would never respect it in the same way as if it was just given to you. Statistically among younger people, those who are given their first car tend to be the ones that end up crashing and abusing them. This would almost never inherit when you have to save the $$$ and buy it on your own.

    Almost in the same way that wealthy people will never experience that overwhelming sensation of paying the last and final loan repayment on your personal/car loan ;)