Even some of the most dedicated hard-core savers have a problem when it comes to spending too much on their children. Let’s face it: we all have a soft spot for our children. Most parents want their children to have all the things they never had growing up. This is natural and is something parents of all income levels want to do for their children. The problem with this kind of thinking is that your overspending is not only doing a disservice to yourself from a financial perspective but you’re also not teaching your child the value of a dollar.
As a parent, you get a special feeling when you see your child’s eyes light up when they get their favorite toy. This is one of the great joys of being a parent and is something I would never want to deprive you of. But no matter how badly you want to spoil your children, you have to instill financial discipline. Spending $1,000 on your child for Christmas when you can only afford $500 is only going to hurt your financial future, especially if you’re using credit cards to pay for the difference. This happens much too often since parents don’t want their children to feel deprived. You’d probably be surprised at your child’s response if you just sat down with them and had an honest conversation about what you can afford to buy for Christmas, birthday, or back-to-school shopping. Just remember that although your child may want the world, the one gift that matters most to them is your love, patience, and time, which is something money just can’t buy.
Besides the financial implications overspending on your children will have on your wallet, there are also the unintended consequences this approach will have on their future. To explain, when your children are living at home, this is the best time to teach them about money and budgeting. Even if you tell your children that saving is important, your actions regarding your spending habits, on yourself and them, will overshadow your words. Take this opportunity to lead by example and teach them about priorities so they understand they can’t have everything they want. This is a very important lesson for your child, as the last thing you want when they go out on their own is to mismanage their own money and wind up in debt. If they never understand the value of money because you bought everything they wanted, how do you expect them to make good decisions in the future regarding their own finances?
If you have a child over the age of 12, try giving them a budget to work with when it comes to back-to-school shopping or some other purchase where they have to manage a certain amount of money in order to get what they want. This will teach them how to comparison shop and make decisions about what priorities must be set when choosing between an expensive pair of shoes, jeans, etc. For example, let says you decide to give your child a budget of $400 for back-to-school shopping. With this budget, they may decide that no matter what they want a pair of $100 jeans. Although you may not agree with spending all that money on one pair of jeans, don’t judge. Just remind them that spending $100 on one item only leaves $300 for shoes, tops, etc. Once they realize you’re serious about this budget, they’ll quickly realize that they’ll need to stretch this budget to cover all their necessities.
At the end of the day, you can talk until you’re blue in the face about managing money with your children, but nothing will make your words hit home with them until they are directly impacted by their own monetary decisions. Most importantly, this will give them real world experience on how to prioritize and work within a budget, which is something they will have to deal with sooner or later.