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Without actually exchanging money, your kid could download the new Justin Bieber hit, order up a Frappuccino at Starbucks and purchase a new video game on Amazon. This is, if you allow or overlook such financial freedom.

Such transactions are seamless. You click a few buttons and get what you want.

No one has to bother with counting out exact change or interacting with a cashier. And there is no need to smash up a piggy bank either. Apps like Google Play and iTunes have replaced the coin operated entertainment of generations past.

Kristin Stock, a mom of two young children, knows this firsthand.

“My three year old son purchased multiple shows from our Amazon Prime account by simply clicking on a familiar cartoon character,” Stock shared. “He was baffled when I tried to explain what happened. To my surprise, Amazon has an entire department that handles accidental purchases made by young children.”

Conceptually, money has taken a form not seen at any other time in history. Money, especially to kids, can now seem abstract.

Teaching children the value of a dollar is important. But how do you instill prudent spending habits in kids when physical currency is absent from the purchasing transaction?

Further, there’s the robust influence of advertisement. Kids are vulnerable targets and a child’s financial sway in the family makes them an ideal focal point for marketers.

Advertisements Influence Kids

Advertisers employ savvy techniques to target children. These marketing strategies can come in the form of celebrity endorsements on social media channels, promotional text messages or a cartoon on YouTube cleverly pushing a product.

These marketing funnels are quite successful. As an example, more than 30% of people who view branded content on a Smartphones end up making a purchase.

Sadly, kids 7 and under can’t decipher between entertainment and ads so the messages are received without discerning the intent. It’s a lot like placing a kid inside a candy shop.

These ads, tantalizing and forceful, have a proven track record.

The youth demographic has a lot of spending power too which is great news for companies favored by teens like Chipotle, H&M, Lululemon, Starbucks, Forever 21 and Nike.

Rocking the latest footwear and meeting up with friends for a burrito can quickly burn a hole in your child’s pocket.

Kids need to have a firm understanding of money regardless of their family’s financial situation.

Winnie Sun, Managing Director and Founding Partner of Sun Group Wealth Partners, a financial consulting firm, provides financial planning services to families and companies. She frequently offers perspective on this very topic to parents.

“Everybody wants to sell your kid something,” Sun said in an interview. “Every aspect of your life has to do with something with money so you might as well teach them how to budget their money.”

Soon after a young child learns to talk the word “mine” is emphatically blurted out with great frequency.

For many parents, this milestone begins the struggle between wants and needs.

Financial Education at Home

This ongoing challenge can be handled through financial education in the home, Sun advises. “At different ages you have to teach them different things, but you have to teach them the value of needs over wants,” Sun adds.

Sun, who has three children between the ages of 2 and 7, is a huge proponent of having open conversations with her kids about money.

“A lot of parents don’t even talk to each other about money,” Sun said. “If you don’t become transparent and talk to your children about money, how you spend and how you budget, your child will have a rude awakening. It’s better they learn under your roof.”

Couples raising children together need to openly dialogue about household funds to ensure both parents are on the same page when it comes to the family budget, spending, saving and long-term financial planning.

Allowing conversations about money to unfold organically is key to reaching kids.

Sun advises parents not to force the subject of money and make it into a formal family meeting. That would turn kids off.

“Intertwine the conversation of money into your everyday life,” Sun offers. “Kids, regardless of age, are listening. A lot of parents tell their kids how to spend and save, but parents need to empower them.”

Parents can begin limiting options when it comes to making purchases. Allowing a child to select between two items, or between an item and an outing, provides an opportunity for a child to weigh the pros and cons of each choice.

Sun also emphasizes the importance of parents being on the same page when it comes to a family’s finances.

“It’s very crucial that [kids] have one message when it comes to money,” Sun added. In Sun’s household, her kids know that the family places value on experiences together over material possessions. “They are taught where the money will go.”

The Function of Money

Money is a way of life, but not a defining factor. The way people relate to money is complex.

Sun believes it is wise for kids to understand the fluctuation of individual budgets, and on a greater scale having some basic knowledge of the financial market as a whole. Sun practices this with her eldest son offering him sound advice when they take a look at his 529 Savings Plan for college.

“I tell him not to get emotionally tied to the money, but that money is a way to get from point A to point B,” Sun shared.  “Respect money: how hard it is to earn money, keep money, and accumulate savings.”

Money, advertisements and material goods will continue to influence all of us so what are your next steps to help your kids be financially responsible?

When parents establish clear parameters in their household, the abstract concept of money becomes clear. Sun offers practical ways parents can teach their children to be financially savvy and responsible with money. Follow Winnie Sun on Twitter.

 

  1. Establish a clear precedent with your child when you go into stores together. Have a list of the specific items you want to buy and don’t stray. In Sun’s household, her kids have been taught to think of stores like Toys-R-Us and Target as museums. “You just look, but you never buy,” Sun said.
  2. Help your child form habits in collecting items that do not cost money. Sun has taught her children that the only items collected in their household are memories.
  3. Invest early. Sun advises that parents set up a 529 College Savings Plan. Sun encourages parents to sit down and review the monthly statements to teach children about market trends. Through this exercise, kids learn that the market goes up and down.
  4. If your child is very adamant about purchasing a material item, you can test out this approach. After your child buys the item, place the item somewhere out of site in your household and wait a week or two. If your child forgets about the item altogether, it’s clear that the item wasn’t that necessary and can be returned.
  5. Teach your children not to place too much value on material items. During adolescence, kids are striving for peer approval and often want the latest clothing or footwear to fit in. Sun encourages parents to instill confidence children through validation of their personal qualities like work ethic and compassion.
  6. Sun suggests allowing a teenager to have a credit card, but to teach them about this responsibility. Help your child understand what would happen if they spend beyond their budget. Teach your child about interest and how fees pile on if you are unable to pay off the balance each billing cycle. Sun encourages parents to explain how a credit score is like a report card and you want good marks.
  7. Decide as a family what you want to splurge on. Many parents want to find ways to treat their children. Pick one way that you will spoil/splurge on your child and stick with it.
  8. Instill strong work habits. Take your children to work. Provide opportunities around the household for your children to earn money. “Find ways for them to be productive,” Sun shared. “That teaches them that they are being rewarded for being productive.”
  9. Don’t treat money as a taboo topic in your household. Talk about money.

Comments

  1. Great article!

    My kids are still very young (2 years and 8 months) and I am about to start a savings account for them. This is really helpful for me to start early with setting the expectations for them and the good money habits!

    Thank you!

    • Thanks, Mariana! You are very smart to be planning ahead for your kids’ future. I’m so glad you found the article helpful. Your two year old is at that age now where he/she is definitely going to be influenced by marketing in the form of snazzy toys and colorful packaging for snacks. Parents have to start early so they can make an impression before the advertisers’ voice becomes louder. I really appreciate you checking out the site, and hope you visit frequently.

  2. Joel Schiff Says: May 10, 2016 at 2:25 am

    Well written article with a lot of good info for parents.

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