“Recently my teenaged daughter begged me to take her shopping for clothes for a party. All the outfits she wanted would have cost at least J$15,000, and I refused to spend that much money. Although I told her that I couldn’t afford it, she insisted that I use my credit card and pay for it later, as her friends’ parents do. I’m very worried about her attitude towards money. What can I do to correct this?”

Last week we looked at how many of our children were getting caught up in the massive spending spree that has overtaken Jamaica. They are heavily influenced by the ‘bling’ culture that’s portrayed daily in the media, and they can feel inadequate if they are not able to buy the latest fads.

Unfortunately, some parents are helping to feed this consumer spending habit by accommodating their children too much and giving them everything they want regardless of the price. It sometimes seems that the adults are trying to make up for all the things they didn’t have as children, by overspending on their own kids.

In order to raise financially savvy and independent children, it is very important that we teach them the right values about money.

Last week we examined some of the key laws about money that kids should learn: you have to earn money to spend it; you can make your money grow by spending less and saving more; and you can make your money help others by sharing with the less fortunate.

These positive money attitudes should be passed to our children from as early as they can count. It is also important to show them how to deal with money whenever they get some. Here are three things that you can encourage your children to do, to help them to use money responsibly:

1.   Differentiate between wants and needs

The inability to tell the difference between things we really need and items we want is probably the biggest reason why both kids and adults get into trouble with spending. How many times have we walked into a store with the intention of buying a specific item, but walked out with many other things that we suddenly, somehow, just ‘had to have’?

It’s very important to show your kids how to discipline themselves to differentiate between wants and needs. They may need new shoes, but the brand name version that costs more than their clothing budget for six months is only a desire. They may say they need the latest video game, but you can point to the other ‘must-have’ toys that are probably lying unused in their closet, as an indication that they won’t die without it. Teach them that acquiring the things you want, as against those that are vital for survival, should only come when you have excess money that can accommodate that lifestyle.

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2.   Set goals for money

Training your children how to set goals is one of the most vital life lessons we can give. You can show them how to set a target by encouraging them to save towards some item that they have been longing to have. For example, if they really want the latest toy, but it’s not their birthday or Christmas, tell them to put aside some of their lunch money in order to save towards buying it. Promise to match their savings if they can save a target amount in a set time.

This practice will continue into adulthood when it’s time for them to save towards the deposit on a house, for higher education or for retirement. It would be wonderful for them to use a financial calculator to see how much they would need to save and how long it would take them to save, to meet their particular goals.

3.   Become a smart shopper

With the barrage of clever marketing that encourages consumers to want more and spend more, it’s crucial to help children to become smart shoppers. Look at the advertisements together and help them to evaluate if the item on sale is a really good buy, or show them how the words ‘free gift’ can entice people to buy what they don’t need. Point out that brand name goods do not necessarily give better value for money than the regular items, but show them how to spend more when quality is important.

Let your kids help you to make up the grocery list and look out for bargains in the newspaper. Take them to the supermarket where you can use comparison shopping as a game. Get out your calculator and help them to work out unit prices for goods, so that they can see which ones are really less expensive.

Look out for every opportunity to teach your children how to use money wisely. In fact, the process of making your kids into smart money users will probably help you to become a better money manager too!

Copyright © 2007 Cherryl Hanson Simpson. No reproduction without written consent.

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Originally published in The Daily Observer, May 17, 2007

Cherryl is a financial columnist, consultant and coach. See more of her work at www.financiallyfreenetwork.com and www.financiallysmartonline.com. Contact Cherryl