During a recent podcast interview related to my new book, Trusted: Preparing Your Kids for a Lifetime of God-Honoring Money Management, I completely muffed an answer. The host asked what I would suggest doing about a kid who spends every dollar he receives. I don’t remember what I said, but I know I didn’t give a direct answer to that question. Here’s what I should have said.
Expecting too little
If your child is spending everything he gets, you may be making life a little too easy for him!
Good parents often do too much for their children. This is their one great mistake.
– Edward Hallowell, author of The Childhood Roots of Adult Happiness
If your child receives an allowance, spends it all very quickly, sees something else she wants, and you buy it for her, you’re doing too much for that child! Far better to practice the authoritative style of parenting talked about in my book where we set high standards for our kids and then warmly enforce those standards.
In this case, you could say something like, “I’m sorry, I know you want that right now, but you’re going to have to wait until next week when you receive your next allowance.”
Introduce the give-save-spend framework, and introduce it early!
As soon as your kids have any money flowing into their lives, teach them to give the first portion back to God, save a portion, and then the rest is available for spending.
Maybe you’ve heard of the 10-10-80 framework. The idea is to give 10 percent, save 10 percent, and then spend 80 percent. That’s fine for adults (although I prefer 10-15-75), but for kids, something like 10-50-40 makes more sense: give 10 percent, save 50 percent, and then spend 40 percent.
Kids don’t have a lot of expenses that they will have when they get older. They don’t have to pay for food, clothing, insurance, or taxes. So, if they get used to spending 80 percent on trinkets and toys, that won’t be sustainable when they get older and have all those other expenses to cover.
Plus, soon enough I’d like the saving category to be split in two, with some money going into savings and some being used for investing.
But again, you ask, what about the kid who won’t save?
Feeling some pain
Spendthrift kids are probably not experiencing any consequences for their free-spending ways. It’s time to expect more from them.
If your kids are free to fritter away money they should be saving, I would take a closer look at how much you’re buying for them and make them responsible for more and more of what they want. Maybe they’re getting too much for their birthday or at Christmas, so they never have to save for anything remotely expensive.
If your son wants a new skateboard, I’d put that on him. Help him shop for the skateboard he wants, break the price down to a weekly savings goal, and figure out how many weeks of diligent savings will enable him to accomplish his goal.
When he’s tempted to overspend, remind him of his goal: “Let’s think of future you, the one with that great skateboard.”
If going with you when you go shopping is creating too much temptation, don’t take him to the store so often.
Help him see how much progress he’s making by coloring in a thermometer, just like you see towns use when they’re raising money for some worthy cause.
And celebrate the accomplishment of his goal with a special dessert.
Be sure to also teach him what God’s Word has to say about saving:
“The wise man saves for the future, but the foolish man spends whatever he gets.”
– Proverbs 21:20.
Tell him how proud you are of him and how pleased God surely is with him for saving for the future.
Your kids may not like the process early on, but cultivating within them the habit of patiently saving for a future need or want will serve them well for the rest of their lives.
For more on teaching your kids about money, pick up a copy of Trusted: Preparing Your Kids for a Lifetime of God-Honoring Money Management.