Despite all the talk about how expensive kids are and how much parents now spend on essentials from food to health care, it turns out parents are also giving away steady chunks of cash to their children in the form of an allowance, gifts and even bribes. Parents looking for ways to teach their children about money and protect their bank accounts could benefit from rethinking this strategy.
A survey of 2,174 respondents released earlier this month from vouchercloud.net, a coupon site, found that on average, children under age 10 receive $1,360 each year from their parents, which comes out to about $113 a month -- about the price of an all-inclusive cable bill. Seven in 10 parents said they give money to their kids regularly, and the most popular reasons included a monthly allowance, rewards for good behavior or achievements, bribes to get them to behave, gifts for special occasions and compensation for chores.
Parents, though, also say they wish they weren't giving their kids so much cash. Two in three parents said they wish they gave less money, but they couldn't give less because they feel "in competition with other parents" or they "don't want to disappoint" their children. A minority -- 17 percent -- even admitted that they had to hand over the cash because their child "likes expensive things and needs enough to buy them."
Yikes. Given that we're talking about children under the age of 10, the fact that parents feel pressured by their own children to spend more money, or give their children money to make purchases, suggests that parents are not doing a good job standing their ground, or defining their financial values and then passing on those values to their children. And that matters, because parents are the best, and in many cases the only, role models children have as they develop their own financial lives.
As U.S. News has previously reported, parents play an important role in teaching their children about money. Financial educator Mary Ann Campbell. a certified financial planner, has found through her doctoral research at Iowa State University that money attitudes are frequently passed down between generations. If parents and grandparents talked about and modeled living within one's means -- saving, planning ahead and limiting debt -- then their kids are more likely to do the same. That's why Campbell urges parents to practice the financial behavior they want their children to eventually have.
Vouchercloud.net product director Matthew Wood suggests that parental guilt often gets in the way. Parents, he says, feel badly that they don't spend more time with their children, so they attempt to make up for their absence by handing over cash. It doesn't take Dr. Phil to recognize that parents can't trade money for quality time at home.
Here are some suggestions for parents struggling to pass on healthy financial habits to their children:
1. Read money-themed books together. Alpha Consumer previously recommended children's books with embedded financial lessons, including Beverly Cleary's "Ramona," in which the title character watches as her father copes with a job loss, and Vera B. Williams' "A Chair for My Mother," where family members work hard and save so they can buy a new chair after a house fire.
2. Talk about saving. Kids can learn a lot when parents share their budgeting, purchasing and saving habits with them, although they rarely do so, possibly because parents don't feel they are well-versed enough in finances to pass on lessons. But even pointing out how to compare prices at the grocery store can turn into a lasting life skill. Parents can also share how they are saving and planning for bigger family goals, like a vacation.
3. Let them make their own mistakes. If your child has saved up his or her allowance and wants to buy the latest trendy toy -- a toy you know will break or become boring to them within days of the purchase -- it can be hard to hold yourself back from telling your son or daughter not to buy it. But allowing children, especially older ones, some independence in their buying decisions can help them learn those lessons in a way that will stick. If they feel they wasted their money on a faulty product, then they'll probably be less likely to repeat that mistake next time.
With this kind of gentle-but-firm prodding toward smarter financial choices, you might both wind up with larger bank accounts.
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