Shepherding Smart Spenders

How to Encourage Mindful Spending Habits in your Kids

Some kids are natural savers and some can’t wait to spend their hard-earned (or gifted) money. The second they acquire any amount, it begins burning a hole in their pocket. “Can we go to Walmart?” is a popular phrase around my house. But when I ask why and the answer is, “Because I want to spend my money!” it gives me pause. I want to encourage my kids to spend their money mindfully: carefully choosing items and saving for larger purchases while still enjoying the fruit of their labor. I want to teach them to be intentional about their decisions and to be wary of impulsive spending. Here some things I do to help my kids develop mindful spending habits.

A place for everything, and everything in its place

First we create three “buckets” for their money: money to give away, money to save for the future, and money to spend freely. These can be anything from separate bank accounts to actual, physical containers. Each paycheck, birthday cash, or other income should be divided among the buckets – the amount that goes into each isn’t as important as making sure something goes into each bucket. I let my child decide! This teaches them to make a plan for their money before they go to the store or shop online.

The give bucket

Generosity has many benefits – studies have shown it positively benefits mental and physical health, reducing stress and increasing lifespan! Generosity is also an important tenant of personal faith. I help my kids research charitable organizations to find one they want to support. They might contribute to their church, an animal shelter, a food bank, or something completely different. No amount is too small to give, but if they want to make a more substantial donation I encourage them to compile their contributions to donate in one large bundle at the end of the month or year.

The save bucket

I inspire my kids to dream big dreams! We brainstorm together about big ticket items. These will differ based on the child’s age and maturity – a first grader might imagine buying a large toy, while a teenager plans to purchase a new phone or brand name shoes. I help them determine their target amount and how much they need to save to meet their goal. Waiting is hard, but learning delayed gratification will benefit them in the long run. Once they have saved that amount, go make the purchase together and celebrate with them! It’s okay to start with a smaller item. We want it to be achievable! The goal here is to positively reinforce the habit of saving. As my children get older, I introduce short-term vs. long-term savings goals, as well as creating multiple savings funds for different things.

The spend bucket

This is the fun part! I want to teach responsibility and mindfulness, but it’s also important that they enjoy the personal reward of earning and spending money! Even with this money designated for spending freely, I can help my kids truly consider an item before they purchase it. In our family, we put items in the cart to “think about” during our trip. Before we reach the register, we stop to evaluate each purchase. We teach our kids to ask themselves, “Do I need this? Is it good quality? Do I already have something similar? Do I really want to spend my money on this?” We, as adults, also model this behavior, including putting things back on the shelf. Another option is to require your child to wait 24 hours before they purchase the item. Some things are shiny in the store but not so enticing the next day.  It does happen that they still decide to buy junk, even after all of our encouragement. When this happens, we let them make the choice and experience the consequences.

Rein in redistribution

Here is the toughest part to teach: We DO NOT move money from one bucket to another without SERIOUS consideration. (I am a mean parent, and I go so far as to not allow it at all, at least for younger children.)

Now I’m not talking about changing their minds about which toy they are saving for or what charity they want to send a donation to. I mean we don’t take money out of the Give or Save buckets to spend at the store because our eyes are bigger than our wallet (or in this case, bigger than our Spend bucket). Yes, they have more money, but they already decided what they were going to do with those funds. This can be really difficult for younger children to understand, and older children to follow. Okay, it’s difficult for all of us to follow – parents too! But if we use the money designated for our mortgage payment on a spending spree or a vacation, there will be serious consequences.  Teaching my kids to make a plan for their money and to follow that plan will set them up for financial success! If they learn now to spend less than they make, they will be light years ahead of their peers.

I know you want the best for your kids, just like I want the best for mine. It’s not too early or too late to get started teaching your children about mindful spending habits. You can do it! If you have any questions or want to make a personal plan for your own money, give us a call! We can help!