Bob Masterson of familymint.com talks to Fox 2's Murray Feldman about teaching your kids how to handle the gift of money. Play the video to get some great lessons on instilling the value of money management.
Christmas and birthdays are often a time when kids get a windfall of cash and gift cards. Should you let them run right out and spend it all? Whoa. Not so fast. An incredible teaching opportunity for your kids has just presented itself.
The first of these is delayed gratification and putting a plan together on what to do with this new found fortune. The temptation is to let them go ahead and spend it. However, here’s a way to still let them get excited about spending but learn some important lessons about savings at the same time. I recommend breaking their money up into three buckets. This also gets them into a pay yourself first mentality.
1. Have them set aside a portion to give to the less fortunate, say 10%. Doing this first whenever they earn or get money builds a charitable heart and helps them think of others before themselves.
2. Have them take 40% and put it into savings. Save it???? I thought gift money was supposed to be spent on myself? Of course it is. Explain to your kids that savings is spending on yourself for the future. Open up a high yield savings account or CD and start earning interest on this money until you are ready to spend it. Look around for special offers as often times you can get a cash bonus for opening an account. This is how to really compound that gift money.
3. The remaining 50% is for spending. But don't just run out and spend it, even if they are gift cards. Too often kids and adults make rash purchase decisions and then later deal with buyers remorse. Have the kids create some goals for things they really want and then prioritize these goals. This helps in putting a budget together before making any purchase decisions.
Now as a parent you might get some push back on the giving and saving idea, especially from older teens, but if they don't start forming these positive money habits now, they will only find themselves like the majority of people who struggle with money in the future. Turn these gifts of money into gifts of financial literacy and turn them into fun-loving, money-smart kids.