Even if you are a smart spender, your kids will not necessarily pick up this habit unless you make it a point to teach them. Plenty of kids from frugal households get out on their own and rack up tons of unnecessary debt because they do not understand the principles behind smart spending. Therefore, from an early age, start training your kids in the techniques they'll need to spend their money wisely and avoid debt whenever possible.
Saving before you buy
Kids need to understand that they cannot buy something unless they have already saved the money they need for it. When they ask for items that they cannot afford to purchase just yet, it is the perfect opportunity to help them develop a savings plan to make the purchase happen. Sit down with your son or daughter to discuss how much the item costs, how much they want to save for it each week, and how many weeks it will take to have enough money.
Help your child walk through the process of saving, at least the first time or two. Younger kids do best with tangible methods, like putting coins or bills in a jar with a picture of the item taped to it. Older kids saving for a bigger purchase may prefer to deposit money into a savings account each week and work toward the purchase that way.
Learning to shop
Another principle of smart spending your kids need to learn is purchasing items at the right price. It may not be intuitive for them that the most expensive items are not actually the best, or that you do not always want the least expensive items. You'll also need to get across the idea that items on sale are not necessarily "saving" them any money, just giving them a lower price to consider.
Start at the grocery store on your household shopping trips. Let your kids look over the weekly advertisement with you to pick out the items to put on your list. When you need items that aren't on sale, have them help you find the best deal among the available brands when you get to the aisle.
Setting a good example
Whether you like it or not, your kids are watching you and being shaped by your actions. Therefore, when you are trying to teach them smart spending habits, you also need to be a smart spender yourself. Don't be afraid to talk about your budget, especially when you refuse to buy things your kids want, in order to save money for more important priorities.
It's also helpful, especially when your kids are younger, to make purchases in cash instead of using credit cards or debit cards. This allows them to see the exchange of money happening, so they more clearly link the fact that you need to have money to be able to buy things. As your kids grow into teens, you can start talking about credit cards and how to use them wisely for emergencies or purchases you'll pay for in full when the bill comes.
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