Thanks to cherished family traditions like birthday celebrations and presents from Santa and the Tooth Fairy, today's children are often bombarded with gifts from an early age. In fact, many kids begin cashing in on their baby teeth before they've even grasped the concept of what money is and where it comes from.
According to a recent survey conducted by my employer, Visa Inc., 94 percent of children under age 10 are visited by the Tooth Fairy, reaping an average of $3 per tooth. By that standard and compared to what some of our neighbors give, my wife and I are relative cheapskates with a $2 bill for the first lost tooth and a $1 golden Sacagawea coin for each thereafter. (Fortunately, our kids haven't yet complained about the disparity.)
Like most parents, we wrestle with knowing how much is appropriate to give, as well as how we can best teach our kids to appreciate what they are receiving, whether it's a gift, a necessity (like clothing or braces) or the allowance they earn. Our goal is to share the joy surrounding the exchange of gifts while at the same time using those occasions as teachable moments that will help our kids learn how to manage their money in the future.
For example, our kids learned early on that whenever the Tooth Fairy visits or they get a birthday check from their grandparents, a small percentage goes to charity right off the top to help those less fortunate.
Another portion goes into their savings accounts to help them save for big-ticket items they covet. The rest is theirs to spend or save as they please. We try to allow our kids to make financial decisions and mistakes on their own in a safe environment before the stakes become too high. We'd rather that they regret blowing a birthday check now on a toy they'll soon forget than enroll in a cell phone plan they can't afford later on.
If your kids are too young to open a bank account, you can introduce them to the idea of dividing up their money for different purposes by using the Money Savvy Pig, a clear plastic piggy bank with four compartments (save, spend, donate and invest) that was created by Money Savvy Generation. It's also a good way for youngsters to learn about different coin denominations.
As your kids get older, start having discussions about:
If you need resources to help guide these money conversations, here are a few helpful financial education sites:
And finally, remember that kids often mimic their parents' behavior, good and bad, so if they see you spending beyond your means to buy gifts, they may follow suit later in their own lives.
This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.
To Follow Jason Alderman on Twitter: www.twitter.com/PracticalMoney
Follow Jason Alderman on Twitter: www.twitter.com/PracticalMoney