Kids learn a lot from their parents, and financial smarts are no exception. A study from North Carolina State University and the University of Texas found that children pay close attention to financial issues, and also found that parents should talk to their kids about money so that their kids won’t develop misconceptions. Knowing how to talk to your kids and especially how to teach your kids to be smart with money can be difficult. There are many ways to teach kids about money, including making them work for their money (through an allowance), teaching them the importance of saving and, of course, trying to make learning about money as fun as possible. Another important step is to teach your kids the difference between wants versus needs — and part of the way that this distinction can be understood is by learning how to say no when your kids ask for things they don’t need.
Your kids will probably grow up hearing you say no often, but for some parents, saying no to things that kids want can be difficult, especially if the item or activity is affordable. We all want to please our kids, and many people want to give their kids the things that they didn’t have while growing up. However, it’s really important to be able to say no to your kids when it comes to financial matters. Teaching your kids that they can’t have everything they want will help them prioritize their needs later in life, and hopefully, will help them to value their things and be responsible with money.
If you want to keep your negative response as positive as possible, there are ways to say no that will allow you to do that. According to MSN Money, you can try offering alternatives (which can be an effective method of teaching your kids about how much things cost as well). You can also set a budget and be honest with your explanations. Although these suggestions work in general when saying no, they are particularly effective when it comes to financial matters because your kids will learn about money when you talk about your budget and when you are honest about your finances.
In addition to being comfortable with telling your kids no, you also need to teach them the difference between wants and needs. From a young age, most children will understand that they need water and food. You can also explain the way that a job works (you make money in order to pay for food, shelter, and even the lights and heating in your home). Explain why you need these things; this might be especially necessary when a child is younger, and often demands things because they want them. When a child is very young, you can keep your explanations short. For example: “The teddy bear costs money, but we also have to pay for the pasta dinner we are having tonight.” As a child gets older, you can explain more about how you prioritize your budget to make sure you can afford the things that your family needs.
Teaching wants versus needs can become more difficult in certain situations. Clothing is one of those situations, because many kids want to have name brand clothing to compete with their friends or feel that they fit in. While we all need clothing, we don’t need specific brands. As your kids get older, if you can’t afford to buy all really nice clothing, you can encourage them to use their allowance, ask for a particularly nice item for a birthday or holiday gift, or get a part-time job.
Another difficult lesson for kids can be related to school activities. It is important to encourage kids to participate in activities they enjoy, but if you want to save money, you need to be selective. Most kids participate in sports and other school activities, so your child might have a hard time seeing these extras as wants instead of needs. This is a great time to explain the idea of choosing what is really important so that your kids understand that they can’t always pay for everything. You can also teach them to cut costs in order to make things work (for example: purchasing used sports equipment when possible). This is another important lesson for them to learn.
More and more, kids now have electronics, including cell phones, tablets, and video game machines. Again, it can be difficult for kids to understand why all their friends have something, but they don’t. This is another opportunity to teach your kids about working and saving for what they want. If your child really does like electronics and you can afford to buy them for your son or daughter, try to use them for educational purposes as well. There are many apps, as well as games online that will allow your kids to have fun, but learn about money at the same time. One such game is Mad Money by PBS KIDS.
If your kids learn that they can expect you to pay for the things they need, but that they have to work for the things they want — with obvious exceptions of course; it is okay to buy your children gifts and to help when you can — they will learn to appreciate their stuff, and hopefully, will be money smart adults when they grow up.