Teaching kids to handle money wisely

One major responsibility God has given parents is to train their children to handle money in a wise and godly manner. Frequently on the radio, parents will explain a problem with their children that involves money – a problem that they have not been able to overcome. Here are a few of the most common challenges that I hear about from parents, and some thoughts on how you might handle each situation.

Problem 1: The “spender” child.
Invariably, I’m asked how to handle a child who wastes his money. The problem is that he seems to never have any money left. Therefore, he puts pressure on the parents to continually give him extra money in between the allowance payments.

Solution: The envelope system is probably the best answer to the spender child. The envelope system makes a child responsible for his own behavior; therefore, if he is frivolous with his money, he alone will bear the consequences of his actions. The great temptation of the parent is to go ahead and give more money, knowing that the child does not have any extra money. It is easier to give them more than to pay the price of conflict for not doing so.

Principle: You must give your children the freedom to fail, and you must allow them to bear the consequences of their own decisions.

Problem 2: The “hoarder” child.
How do you handle the child who won’t spend his money? Recently, a lady told me that when one of her children was younger, she would give her child money for refreshments when they went to a place like the fair. But the daughter would not spend the money for a drink, even though she was thirsty. Instead, she would ask her mother to buy her something to drink.

Another example is the child who will not spend money on the clothes that he needs. The money has a much higher priority to him than peer pressure or parental pressure. I’m sure many parents would like to have this problem, because most children are just the opposite. But it is a real problem if the money is not being spent as it was intended.

Solution: It is very important to teach the principle, at a young age, of saving a portion of everything that comes in. However, the challenge in this case is that the child is not spending that portion of his or her allowance that was designated for necessary expenses. Using what we would call “the government approach” may be the best way to overcome the hoarder-child challenge. The government, in setting its yearly budgets for the various departments and agencies, will reduce next year’s budget by any amount unspent at the end of the current year. As a consequence, the agencies and departments are motivated to spend everything in the previous year’s budget before the end of the year. This technique will work with children also, by merely reducing the amount that they will get in the next month, or year, by the leftover amount.

Principles: First of all, the answer to the question, “Why won’t they spend?” needs to be determined. It may not be, and probably is not, a money problem. It may very well be a security problem. The classic story in the Bible dealing with the foolishness of this problem is probably the story of the “rich, young fool” who built barns and hoarded grain to no avail. His perspective was entirely short-term, and he forgot that we are given resources for the purpose of using them.

Money, of course, is always a resource, and not an end in itself. Money is to be used – not spent. When you view money as a resource, then it is used to accomplish some end. On the other hand, when money is looked at as merely something to be spent, it is handled frivolously rather than wisely.

Problem 3: Children’s friends who get more money than your kids do.

Say you let your child go shopping with a friend, and your child is on a set budget, but the friend shows up at the shopping center with a credit card for all of their purchases. Not only that, but the friend’s parents have set no limit on what the child can spend. This scenario is more common than you might think. It may even be as simple as one of the 6-year-olds down the street getting $5 per week, while your child gets only $3 per week.

Solution: First of all, gather your facts. Is the situation really true? Second, be willing to re-evaluate the budget amount you are giving your child. Third, make your child a part of the process of evaluation and re-evaluation. And fourth, if you still feel you are doing exactly as you should, then be firm in your decision and do not succumb to the pressure.

Principles: This problem is particularly important to solve, because it happens so often. There will always be others with more money and/or less discipline. Succumbing to the pressure of what others do is not a money problem but an issue of values and self-discipline. You, as a family, will have certain values that are reflected in the way you spend money; because someone else has different values does not make them right. This problem may offer you a great teaching opportunity. Don’t overlook the opportunity by caving in to the pressure from your child.

Problem 4: Grandparents who give unwarranted and large gifts to your children.

Many grandparents give their grandchildren cash and other gifts that the parent would not give, or could not give, to their children. This interference often undermines the authority of the parents, and undoes what the parents have attempted to teach their children. It can be a very serious problem when the grandparents feel it is their right and responsibility to “spoil” their grandchildren.

Solution: I suggest you pick one or more of the following alternatives. The first and best alternative is to lovingly confront them with what they are doing. But do this only after you have a teaching system, such as the envelope system, in place, so that the system itself becomes the standard – not you, and certainly not them. You can ask them to participate with you in the system before confronting them about their behavior.
A second idea is to present them with an alternative to the large gift. For example, you could ask them to set up a savings account or a college fund for the child. Or you could ask them to spend time, rather than money, with your children. The grandparents could also choose to give gifts, but set a limit on the amount of the gifts. In this way, you will not remove the pleasure they get out of giving, and hopefully it will not thwart what you are attempting to teach.

Third, you could have your child accept the gift, but put it in his own savings account, and later share with his grandparents how he used the total amount given.

Principles: Unfortunately, there’s no easy answer to this problem. The relationship with the grandparents is certainly one to be treasured and cultivated. However, when it stands in the way of teaching your children the principles of living a successful and godly life, you may need to stand firm.

Financial training takes time and consistency, but remember that you are not training children; you are training future adults. Taking the time to provide solid, biblical financial instruction during childhood can avoid a lifetime of costly financial mistakes. Take that to heart as you teach your children to keep money and possessions in an eternal perspective.

Rob West is the Training and Communications Director for Kingdom Advisors, a nonprofit Life that exists to equip and disciple Christian financial advisors to integrate their faith and profession. Please send questions and comments to [email protected]

The information in this article is for information purposes only, and does not constitute advice. You should not rely on any information in this article, either to make (or to refrain from making) any decision, or to take (or to refrain from taking) any action.
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