Teach your children about spending, saving and doing without

Dina Gerdeman

A few years ago, Maria Wood knew she was overindulging her 11-year-old daughter by buying her a Coach bag for Christmas, yet she bought the pricey purse anyway.

“I did it against my better judgment, and that pocketbook sits at the bottom of a closet now. What did it prove?” said Wood, a mother of three who lives in Pembroke, Mass. ”I am part of a generation of parents who has indulged our children beyond what is normal. We let it happen. I’m upset with myself, and I know I am to blame if my children go into adulthood reckless about money.”

Parents complain that their children have the constant ”gimmes” and think money is endless – after all, it spits so easily out of the ATM machine. Yet experts say many parents shy away from talking to their kids about money and how to spend it appropriately.

“Money and sex: those are the things parents don’t want to discuss with their kids,” said Arnaa Alcon, an assistant professor of social work at Massachusetts’ Bridgewater State College who has taught a course on personal money management.

Experts say teaching kids the value of money at an early age is important, and there is perhaps no better time than now – when kids may sense that parents are feeling pinched by higher food and gas prices and feeling worried about an erratic stock market and troubled economy.

Beyond helping children manage their allowance and stretch their piggy bank savings, experts say parents need to understand that their children will learn as much about money from what their parents say as from how their parents spend.

Wood said the rocky economy led her not only to tighten her own purse strings, but it has also made her realize that in the past when she was splurging on clothes and unnecessary items her kids wanted, she was not sending the right messages about smart spending.

“The frivolity of life has come to a crashing halt not only for us, but for a lot of people,” Wood said. ”It’s better late than never to start teaching our kids how to handle money.”

Patricia Leavy, professor of sociology at Stonehill College in Easton, Mass., said parents can start teaching their kids money lessons at an early age by squelching some of their ”gimme” tendencies.

“Kids need to understand they can’t have everything they want, that things cost money and we have to make choices,” Leavy said. ”And parents need to let their children whine. I have left stores with my daughter kicking and screaming, but it’s a better message than saying, ‘If you whine, you’ll get what you want.”'

Leavy makes a point of telling her daughter when she decides not to purchase something for herself because it costs too much.

“My daughter will ask me why I’m not buying a blouse or a pair of shoes for myself if I like them, and I tell her these things are too expensive and I have to be careful to save my money for things we really need,” Leavy said. ”I hope these messages seep in and then later when I’m telling her ‘no’ about something she wants, she might understand a little better.”

It can be helpful to sit older kids down and give them a rundown of the family finances, said Jayne Pearl, who holds workshops for parents and kids about money and has written the book ”Kids and Money: Giving Them the Savvy to Succeed Financially.”

“My 8-year-old and I made a list of everything it takes to run the household, then we multiplied the expenses by 12. He saw that our finances were pretty close,” Pearl said. ”I think it made him understand better when I say that some things are not in the budget.”

At the same time, parents should be careful while they’re cluing their kids in that they’re not scaring them, Pearl said.

“Kids can worry about money, so it’s important to say that people have ups and downs with money, and if you have a down period you learn to bounce back,” she said. ”You can say, even if mommy lost a job, daddy still has a job. And you can invite them to come up with ways to cut expenses. Instead of dinner and a movie, maybe it’s making pizza and having a game night at home.”

Experts suggest starting kids on an allowance between ages 5 and 8. Tell them to save some money, set aside some for charity and spend the rest. Give them enough spending money to cover some everyday expenses, like school lunches, Pearl said.

“You can give kids a choice about whether to spend the $2 on a school lunch or pack a lunch from home and hold onto that money for something else,” she said. ”They learn to save their money for things they really want.”

An allowance shouldn’t be tied to chores or grades. Kids should feel internally motivated to study hard and pitch in around the house without having to be rewarded with money, Pearl said. However, kids can earn extra money for doing ”special horrible chores,” like raking the back yard for three hours, Alcon said.

When it’s time for a shopping trip, whether it’s to the grocery store or mall, it’s important to make a list of what’s needed and a budget ahead of time, then try to work on balancing kids’ wants with their needs.

“Your daughter will see this too-cool blouse and your son will see a basketball jersey out of budget and instead of responding ‘no’ and them responding with a temper tantrum, tell them you know it’s important to them, so maybe you can make it happen if you find ways to scrimp on things that aren’t as important to them, like T-shirts,” Pearl said. ”You’re on their side. You’re their coach and their guide.”

And if kids can find a way to get the items they need and leave the store with money left over, let them keep it.

“You’re giving them incentives to spend more thoughtfully, and you might find they get to the cash register and say, ‘I’d rather have the $50 than these expensive jeans because I’m saving for a concert that’s coming up,’ and you say, ‘That’s fine,”' Pearl said. ”You’re not the one saying ‘no,’ and your child is learning a really important skill, to delay gratification, tell themselves no and make tradeoffs.”

If children want to buy something beyond the budget – perhaps $50 sneakers when parents want to spend $30 – parents should tell their children to bring $20 of their own cash to make up the difference. Parents can also suggest a 48-hour waiting period on items a child wants to buy.

“The danger is impulse buying,” Alcon said. ”If you can walk away and you still really want it two days later, you can revisit the idea then.”

When kids get to high school, it’s time to set up a checking account and explain the pitfalls of credit cards. Besides, at that point kids can get jobs of their own and start paying for things.

Sara Denton, 16, of Marshfield, Mass., works as a hockey referee and babysitter so she can afford clothes, plus gas for her car.

“I really try to find a way to buy the things I need for myself,” she said. ”I know my parents work hard, and I don’t want to ask them for everything.”

Her mother, Teresa Denton, said she has always talked to her four kids about how much they have to work to pay for things they want.

“Now Sara is good at looking at a $60 sweater and calculating how many hours she has to work to buy that sweater,” Denton said.

In the end, parents are doing their kids a favor if they can instill the idea that impulse buys won’t bring happiness, Leavy said.

“You have to think long term and wonder, will they try to make themselves happy by getting more stuff?” Leavy said. ”Parents need to say, ‘We have a home, we always have food, we’re warm in the winter and cool in the summer. We’re really lucky. Everything else is fun, but it’s not really important.”

Wood feels, in a way, grateful that the shaky economy provided a much-needed wake-up call.

“For a good number of years we floated along, living for the moment, and now with the state of the economy, I’m committed to changing that,” she said. ”This struggle nationally has given me an opportunity to let my kids know we didn’t always make the best decisions financially. I tell my kids, ‘Don’t fall into the same trap we did.’ I don’t think it’s too late for them to learn. “

Patriot Ledger writer Dina Gerdeman may be reached at