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Teach Kids Spending Isn't Child's Play

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The Tampa Tribune

Published: November 4, 2007

It's no surprise this year's holiday shopping season is coming sooner than last year's. Chances are, your kids are getting their wish lists together, and those new items won't be left off.

As you head to the stores, you might notice that old standbys such as Monopoly and Barbie have been updated. A version of Monopoly now comes with a debit card instead of paper money, and Barbie has her own credit card in an electronic purse. (Naturally, there's no limit.)

There's even a Hello Kitty debit card aimed at high schoolers - a smart marketing move when you consider that age group has a purchasing power of about $200 billion a year.

Are these versions of your kids' favorite toys going to hurt your chances of teaching them to be financially savvy? They can, but only if you make Barbie - not yourself - the role model.

Show them the money. A problem with this generation of kids is that they're being raised in an era when money is largely invisible.

When I was younger, my parents took their paychecks to the bank. They withdrew cash from a teller, and paid bills from the kitchen table. Today, paychecks are direct-deposited, cash comes from an ATM, we make purchases with plastic and pay bills online.

"Money has turned into this abstract concept. Kids don't go to banks, so there's a sense that money just appears," says Gail Duner, who co-founded LearningCents, a company that helps teach children money values.

The next time you go to the ATM with your child, give a little lesson about how the money got into the machine.

Give an allowance, the right way. Kids need to learn that money is limited; they have to choose what they buy wisely. If you give them an allowance, then continue to foot the bill for everything they want, you're missing your chance to teach this lesson.

Instead, decide what they're going to be responsible for buying. Younger kids can buy their own candy; older ones can take care of their lunches and clothing. Give enough to cover some of these, but not so much that they can buy and buy without thinking twice. And don't forget to encourage saving and giving.

Don't bail them out. If your kids blow their allowance at the start of the week and you cover them for the rest, you can bet the process is going to repeat. Stick to your guns, and they'll learn to budget. But there will be times when they want to buy something allowance just won't cover.

"I would always give kids an opportunity to earn additional money around the house if they feel like they want to buy something and need more money," says Janet Bodnar, author of "Raising Money Smart Kids."

In middle and high school, you might also encourage babysitting or a part-time job. Research has shown that kids can work about 15 hours a week without hurting their grades in school.

Arm them with age-appropriate tools. Start with a piggy bank when they're young, Bodnar says, then transition to a savings account by taking them to the bank and explaining its purpose.

In high school, a checking account linked to a debit card comes in, and with it a conversation about the fact that the only money they can pull out with their plastic is money they put in. Show them how to keep a checkbook register on paper or online.

In college, I'm a believer in credit cards. Why? Because when you graduate, you need to have a credit history. Teach them to use the credit card like a debit card, only spending what they can pay back at the end of each month.

Be wary of stored value cards. These work like a debit card in that you deposit their allowance, then they can use it for purchases. Many, like the Hello Kitty card from MasterCard, are marketed to kids as "cool." They can also be a good tool, as long as you as the parent use it properly - which means adding value on a set schedule and not caving when they exhaust it early.

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