Kids And Spending

At what age should I start teaching my children about money?

At whatever age they start asking questions about money, you don't want to rush things. You want to do it in an age-appropriate way. I always say I'm a pulling parent, not a pushing parent, 'cause you want to keep your kids young. But you know, a financial question could be... you're out with your kids and the kids want to go to McDonald's for lunch, and you say, "Oh, I don't have any money today," and they say, "Well, you can just go to the machine and get some." And this just freaks parents out, because they say to their kids, "Do you think I'm made of money?" Well, of course they do, because they've seen you pushin' the buttons ever since they've been two years old. So you just do a little lesson, you say to them, "You know, the bank really is like a big piggy bank for Mom and Dad, and just like your piggy bank is sometimes empty after you buy something before you put more money in, sometimes our piggy bank is empty until we put our paychecks in. And so when we put our paychecks in, then we'll have money in the bank, and that's what we get money out of the machine." Very simple explanation. Kid now knows band equals piggy bank, and you don't have to explain how the Federal Reserve System works.

What should I do when my children ask for expensive things?

I think parents have to keep in mind that they don't have to buy their kids everything that the kid wants, especially if it's expensive clothes or gear. I think that parents don't have enough confidence in themselves and they think that kids are only going to listen to their peers or they're going to listen to the media. But if Mom and Dad say no, we're not going to do this, then the kids actually listen to you. The younger they are when they hear you say no the better it is. But it's "no" with a reason. No, we don't really need a new video game system right now, because the one you have is fine. No, I'm not going to spend all that much money on a pair of jeans because then I don't have enough to spend on tops or shoes or other things that go into my clothing budget or my back-to-school budget. They need to hear you give your rationale for spending decisions. The second thing is, they need to have a stake in these things. If they want to buy an expensive pair of jeans and it's coming out of their clothing budget then they're going to think, oh dear, do I really want to spend 15 bucks? if I have $30 to spend that's half my budget. I only have $15 left to buy tops, maybe I don't want to do that. Or again, if they want an iPod, have them save for the iPod. So you'll say, I'll pay a portion of it, but if you want this you have to buy it on your own, so that they have skin in the game - a stake in this. They will spend unlimited amounts of money as long as it's yours; when their money is on the line it is a totally different ball game.