What shapes children’s spending habits?

Often, parents or influential people in their lives. Spending habits can also be shaped by society and cultural trends, peer pressure, the media, and religious or spiritual beliefs.

They are developed over time through observation and practice. As parents, you must equip your child with knowledge, help them understand their choices, and allow them to make decisions as they mature.

The objective of this post is to help your child develop healthy spending habits. It is not common sense – instead it is a learned behavior.

Spending wisely and consciously means you will help guide your child to think and then spend their money in the smartest and most productive way possible.

Let’s first take a look at our environment. Today’s corporations spend millions of dollars each year targeting parents and kids to become their next loyal consumer. Marketers make it their job to tell us what we need and what we should desire to attain.

These experts have mastered the art of influence and temptation so well that even as conscious adults, we fall prey to their marketing tactics. Imagine how easy it is for your child to be tempted.

teach kids to spend money

Have you ever walked into Walmart, Target, or the Dollar Tree to purchase one or two items and came out instead with a shopping cart full of things not on your list?

At one time or another, we’ve all been guilty of it. Retail giants and grocery stores line their checkout lanes with items like gum, candy bars, and small toys that encourage impulse purchases—often priced at a premium, when compared to the same item sold in a bundle in the candy aisle.

Beyond the stores, marketing messages are everywhere! Television commercials, custom pop-up ads tailored to sites you’ve visited or searches you’ve previously conducted, electronic billboards, and now even in most movie theaters, we are bombarded with advertisements.

Now, narrow your focus to the world of advertising from your child’s point of view. Consider the peer pressure a child must experience when half the class is sporting the latest gadget or fashion trend.

Even during my school days, kids formed social clubs where they all wore the same name-brand clothing or they set dates to all go purchase the latest athletic shoe, watch, or concert tickets together.

Now, it’s not just the shoes you wear, but the latest phone, tablet, and video games that you have to buy if you want to be the cool kid at the table. My household certainly didn’t have the disposable income for the luxuries I just described.

In retrospect, it sounds ridiculous, but in the perspective of a child, it could potentially place them in a position as being a social outcast. I highlight these examples to raise awareness around the social pressure a child may experience and how potentially damaging it can be the earlier these messages are not combatted with values and healthy habits.

As they get a little older, outside influences like marketing tactics and peer pressure make developing healthy spending habits an even more critical skill to practice and master. When you fish around others, sometimes your lines get crossed.

This concept certainly applies when it comes to peer pressure. As parents, you have the power to expose and override marketing tactics by teaching your children to be conscious consumers.

It begins by providing your child with knowledge and information. Then, empower them to think and ask key questions to develop their financial intelligence.

The goal is to build the muscle memory for your child to instinctively ask themselves key questions before making a purchase. Let’s examine the four questions they can ponder before spending their hard-earned money:

Question 1: Is it a need or a want? Do I really need it?

Needs vs. Wants — Giving your child the skills to distinguish between needs and wants may be the most important and the most challenging lesson you can teach your child. The traditional Needs categories will be covered by you: shelter, food, basic clothing, and utilities—so I’ve devised a list of items that could be categorized as Needs from a child’s perspective:

  • Educational tools, resources, or materials: items that enhance their intelligence, teaches them a useful skill, or helps with school projects or homework. For example, flash cards, a calculator, or books.
  • Passion purchases: items that cultivate or promote an expressed interest, gift, or talent. For example, a musical instrument, art supplies, or cookware to help them develop their skills.

All other items that fall out of these categories are considered wants. And while it is okay to allow them to indulge and enjoy items purely for entertainment, the idea is to make it a thoughtful decision so over time they can clearly distinguish between needs and wants.

teach your child to spend money

Question 2: Is it age or morally appropriate?

Deny Your Child — I hereby give you permission to tell your child no. Their world will not traumatically come to an end if they don’t get the M-rated video game they keep asking for.

When a child sees something and wants it immediately, it can be a struggle to tell them no, or to calm the emotional explosion that happens when this occurs; but it’s all a part of the process.

They must be denied and told that they can’t have everything they want—even if other parents buy it for their kids. “You are not old enough” or “This does not promote our value system” are two simple phrases you can use to explain why they can’t have a desired item.

Question 3: Is this something I can wait to have? Is it worth it, or should I continue to save? Is this a long-term or short-term purchase?

Delayed Gratification — The goal is to help your children avoid or curb impulse purchasing. When they see something they want, make them wait a day or more. Perhaps they need to save more of their own money before they can afford the item that they really want. 

As your son or daughter gets older, you also want them to practice thinking long-term and whether this is the best purchase for today. Consider whether the desired purchase, like a pair of Nike Air Jordans or the first edition drone, will be useful and beneficial over the next three months or if its usefulness will extend beyond twelve months.

Questions you can ask include, Will this style be popular one year from now or will everyone be on to the next great thing? When the new model comes out in a few months, will I want that one too?

Question 4: Who will his help and why? Who could this potentially hurt if I make this purchase?

Impact to Me and My Community — As your child gets older, starting around twelve years old, you should add this question to their purchasing decisions and connect spending money with also being a moral decision. After all, we are all stewards of the blessings given to us and will be held accountable for the way we use our resources.

Encourage your child to research the company.

  • Who is selling the product or service?
  • Are they socially responsible to the community and the things we care about?
  • What do reliable news sources say about the company or product?
  • Do they want to support this company? Why? Why not?

The new generation is obsessed with social good companies. They care and are more in tune with what companies are doing in the community and around issues that are important to them. The objective is to align their spending with their personal value system. Matthew 6:21 (NIV) says, “For where your treasure is, there your heart will be also.”

Benefits of Teaching Good Spending Habits Early

Teaching young children good spending habits early can really pay off. It certainly paid off for me.

Shopping with my Mom was always a field trip. We would visit more than one store and most everything was bought on sale. Her shopping trips weren’t necessarily planned events, but she had a magnetic draw to the sale and clearance racks (even to this day).

I don’t think I’ve ever seen her pay full price for anything. My mom is a whiz at stretching a dollar. It’s evident from pictures of the four of us wearing matching, handmade dresses and my instant recall of wearing my sister’s hand-me-downs year after year.

It wasn’t until my middle and high school years that I realized how practical yet creative my mom was with money. I was never the most fashionable kid on the block, but my mom’s resourcefulness taught me to be frugal and to bargain-shop far sooner than most teenagers.

teach your kids save money

As you work your way to the recommended activities at the end of the post, your child will practice and explore healthy spending habits like setting financial goals, creating a budget, tracking their spending, and comparison shopping. As you promote and practice these healthy habits with your child, they will be equipped to more wisely tackle spending as adults.

They will be able to set goals for themselves and use visualizations and affirmations that will greatly increase their chances to achieve them. They will be proactive, think ahead, and plan their spending and avoid or minimize impulse shopping.

They will look for the best price and deals that will ultimately save them money. They will practice tracking their spending and creating budgets far sooner than their peers. They will learn to be intentional in their spending and tell their money where to go.

As a result of working through the activities, they will also learn through their mistakes. When they make a mistake, embrace their lessons in failure.

Allow your child to make money mistakes so they can experience the consequences or discomfort of making poor money decisions. Use their money mistakes as teaching moments so they too will experience the satisfaction of saving patiently or waiting to purchase something they really want.

With your guidance and the open dialogue created with your child, you can share your spending mistakes and the lessons you’ve learned along the way as well.

Recommended Activities

Here are the recommended activities to promote healthy spending habits. Select one or all to begin teaching and practicing healthy spending habits with your children today:

  • Goal-Setting with Your Children

    Statistics show that individuals are far more likely to achieve written goals as opposed to goals that are not written down. Even Scripture instructs us to write our vision (Habakkuk 2:2). How much more successful would your children be if they mastered goal-setting at a young age?

    Have your child write a financial goal they would like to achieve in the next two to three weeks and place it on their bedroom wall, the refrigerator, or some other public space in the home where they will see it every day.

    Example goal statements include:
    I will save $10 by January 31st.
    I will invest $3 for every $5 I earn this month.
    I will give $20 to [enter favorite charity, church, school] by December 1st.

    Alternatively, if your child is more visual and creative by nature, consider creating a vision board together. Instead of writing their goals down in words, they can use images to depict their goals.

    They can create a digital vision board through offerings like Pic Stitch or Pinterest, or they can manually cut pictures from magazines or online images to create a physical vision board.

    Help them dream and set their sights to create stretch goals for themselves later in life. This activity can be used for many other areas in your children’s lives, so don’t be afraid to help them set financial, academic, or extracurricular goals in their life as well.

    Maybe your child is learning to play the piano. Help them write a goal that says how many times they will practice without their instructor this week.

    Once the goal has been achieved, be sure to acknowledge their accomplishment and have small celebrations. You may be surprised at how quickly your child masters this life skill.
  • Budgeting 101

    A popular way to teach children about spending their money wisely is by teaching them a simple way to budget their spending using 3 categories: Save, Spend and Give.

    You can use mason jars or envelopes to distinguish the money into each category of spending. Have your child draw pictures of what he or she wants on each envelope or jar label.

    As they become more sophisticated and tech savvy, they can use electronic tools like budgeting apps to track their money.
  • Plan Your Spending

    Shop with a list and stick to it. This is an easy exercise that your child can help participate in any day of the week. You can make a list for back-to-school shopping, grocery shopping where they specifically write the items they would like to eat for breakfast or lunch, a school project, or for a sport they are participating in.

    For teens, help them think through everything they may need for one week, make a list, and allow them to handle the responsibility for the week. Use pen and paper or one of the many electronic apps, like AnyList or OurGroceries, to get a few routine tasks started and finished.
  • Comparison Shop Before You Buy

    Another great habit is to look for a great deal on the things needed. Check out sales and discount codes online for the store you plan to visit or specifically for the item you plan to purchase.

    If going to a grocery store or big retail store, have your child look up coupons for items on your list that they can either cut out, print out, or upload on an app for the store. I am a fan of the RedLaser app and I always check the Retail Me Not site before making a purchase online.
  • Distinguish Between Needs vs. Wants

    Here’s a quick and practical exercise you can use to drive home your child’s understanding of needs and wants and help them distinguish between the two: Take a blank sheet of paper or use a white board and create two columns.

    Label one column NEEDS and the second column WANTS. Call out different items in your home and ask your child to write them under the category.

    Once you’ve called out about ten items, go back and discuss why they think the item is categorized as a Need or Want.
  • Ask for a Student Discount

    There are typically two stages in life when you get more discounts than normal: as a student and as a senior citizen. My opinion is that companies are trying to build a young customer base, and student discounts may attract them.

    Wireless is one of the most popular categories where big telecom companies like AT&T, Sprint, and Verizon offer 10 percent or more to students. Auto insurance companies offer teen drivers discounts up to 20 percent when they complete driver’s education classes or earn good grades.
  • Track Your Spending

    This is where budgeting begins! Practice creating small budgets and make them more advanced as your children get older.

    For younger children, start by creating a budget for a school project. Make a shopping list before you go to the store and include two columns.

    In Column 1, input an estimated amount you plan to spend next to each item listed. Make your purchases and return to this exercise. Once you return from the store, review your receipts and enter the amount you actually spent in Column 2.

    Calculate the difference. Were you over, under, or right on target with your estimates?
  • Make Giving a Part of Your Spending Plan

    Giving should come from the heart. Ask your child how they would like to help others. The goal is to make giving genuine and authentic and not something they are made or forced to do.

    Model giving with all of your resources. Begin by volunteering your time. Move to donating gently used possessions, like toys or clothing.

    Incorporate giving monetary gifts and donations whether it’s to a homeless shelter or a charity where they can hand-deliver their gift.
  • Shopping Spree

    This activity will teach comparison shopping and the value of a dollar. Shop at a consignment store for like-new or gently used items at a fraction of the cost.

    Compare the prices you paid in the consignment store to the retail value of the same or similar item either online or from the mall. Explain how over time this can add up to serious money that they can use for other things, like saving, investing, or giving.

Final Thoughts

You just learned practical strategies to spend wisely and consciously with your children. Whether they are just learning about money or managing money on a daily basis, these tips and activities (when practiced) will teach them to be responsible and money-conscious adults.

This is a time to model the behavior you are teaching your children. This is not a time for “Do as I say, not as I do.” Allow your children to observe you taking part in these healthy spending habits, and they are likely to follow suit.

The bonus of teaching your children these spending habits is that it will hold you accountable to improve in areas where you may be challenged.