Read time: Approximately 4 minutes
Do you ever question how to handle monetary gifts given to your children?
Who gets to decide how the gift is spent? The kids (who may very well waste it)? The parents? Or a combination of the two?
Just recently, Mandy and I were having a discussion regarding monetary gifts that her kids would probably be receiving for Christmas. She was concerned that her boys would want to go on a spending spree immediately following the opening of gifts.
It is a legitimate concern given that most kids tend to want to spend their money as soon as the gift is given.
My suggestion was to turn any monetary gifts into teachable moments.
(Because, really, 2020 hasn’t offered you enough teachable moments , right?😉)
Most individuals are not born knowing how to manage income. It is a skill that has to be learned and most of us learn by making costly mistakes.
One of the best gifts that you can give your kids is a solid understanding of basic money management.
Like any skill, the earlier the lessons begin, the more skilled the individual will be.
A great place to begin teaching this critical life lesson is when your kids receive gifts of cash.
What can you do to turn monetary gifts into teachable moments?
Have a conversation with your kids.
Even before any cash shows up in an envelope, talk with your kids about some best practices for monetary gifts.
What are they thinking they might like to do with their money?
Is there anything for which they are saving?
Use the conversation to plant seeds that you hope will grow and bear fruit in the future.
Monetary gifts provide a great way to Introduce some basic financial lingo.
What is tithing? What is saving? What is a budget? Even, what is compound interest?
What kid wouldn’t think it was cool to put money into a financial institution and earn even more money ?
One of my favorite childhood memories is dumping the money from my bank, counting it and going to the bank with my dad to purchase United States savings bonds.
Use gifts of cash to introduce the concept of long -term saving.
Is there a large ticket item that your kids are longing to possess? Now is a great time to point out that perhaps a portion of every cash gift they receive could be set aside in a special account to go towards purchasing the item.
If you are able, consider matching your kids savings towards some long term goal. Not for everything or even every time.
Occasionally offering that option rewards good savings practices and it makes long term goals a little more attainable.
Practice with pretend money before the cash gift is a reality.
Using pretend money is a great way to teach kids about my all-time favorite budget tool, the zero based budget.
Come up with an imaginary amount, write it down and proceed to decide how your child thinks it should be allocated (another financial term that simply means divided).
Would they tithe? Do they want to give any to charity? What will they spend, what will they save? Write it down and then let them go on a pretend spending spree.
Pretend spending is a great way to realize how expensive things really are.
Decide prior to receiving the gift how it will be divided.
Write it down. Using percentages works for any amount. (Example: 10% tithed, 30% saved, 60% spent)
Having a plan in place prior to receiving the gift puts the brakes on an all-out spending spree. This is an excellent precursor to having a plan in place before the receipt of a first paycheck.
Now, parents and grandparents, the hard part
Allow your kids (and grandkids) to make mistakes. Give them some guidance but step back and let them learn.
If they use up all their money only to realize they don’t really like the new toy or they now want something different, it is a great learning tool.
Don’t rush in to fix it.
Better they make the mistake with Legos that when purchasing their first car.
Gifts of cash are fun, but they can be so much more.
Turn your child’s monetary gift into teachable moments and the gift of cash has become a gift that will last a lifetime.
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Love this! We bought Michael a shopping game for Christmas. I think it’ll be perfect for practicing just this!
Also, here’s a tip. If you have your kids go onto Amazon, online, without logging into an account, they can search for things and add them to their cart. This has been lots of fun for my boys. And really, you can do it with many online shopping sites. Since the boys aren’t able to do Santa’s workshop, at school, we decided we are giving them a certain amount of money and they can do their Christmas shopping online. Note, we have decided to do this through the 5 Below site as it was realized prior to giving them a certain amount, when allowing them to look on Amazon, they wanted to get pretty pricey gifts. Thought I’d share because others may want to do this with the kiddos in their life. (Also, another option would be to take them to a Dollar Tree. They have all kinds of stuff, each for a dollar. I’d really like to do this, but due to the current pandemic, online is best option for us at the moment.
Love this idea! Thanks