Smart spenders start with a list

Healthy finances - May 2006


Susan Beacham


As adults, credit and debit cards are a convenience we've all learned to rely on daily. But what are your children learning when you pull out your credit card?

Watching parents use credit cards is the most visible money behavior our children see. But our children aren't ready to use credit and debit cards-not just yet. They first need to learn to use cash and currency responsibly.

However, today's kids are not getting the opportunity to do so. From Hello Kitty debit cards to 12-year-olds with credit cards, our kids are starting off in the world of debit and credit without the benefit of cold, hard cash to show them that money really does have a beginning and an end.

Add to this the further complication that our kids first learn to spend by spending our money-not money that they have earned-and you have unwittingly set the stage to raise an entitled child with no ability to delay gratification.

The impact of this lack of money education can be seen in the consumer spending numbers-for kids. Our kids are powerful consumers, spending our money at record levels.

America's 'tweens, ages 8-12, independently spend $51 billion annually, money they get from sources such as gifts and allowances. Our teens independently spend about $175 billion. One in three high school seniors now carries a credit card and 63 percent of the income teens get and spend comes from us-not from what they earn, according to Alloy Media + Marketing.

So, it should not be any surprise that when our kids go to college they take to credit like a fish takes to water and become overwhelmed with debt. To change our children's behavior, we need to change our behavior.

"There is too much at stake to leave the 'basic training' about money to chance and hope that your children will absorb pertinent information by osmosis," says Charles Collier, Harvard University professor and author of Wealth in Families.

Too much indeed. Without some basic training our kids could eventually become members of the fastest-growing group of people declaring personal bankruptcy-20- to 24-year-olds. And, for those college graduates, bad credit ratings can be used to deny them a job or insurance. Without a job, how can the debt-laden college graduate begin to pay back that debt?

Start with a list

To avoid these scenarios, start by teaching your kids how to set a spending goal. Ask your child to get a piece of paper and title it "Gotta have it!" This list should be carried in their purse, pocket or wallet whenever they shop. Encourage them to add and subtract "wants" and "needs" from the list for a week.

At the end of a week, take the list out and ask them to prioritize the items on the list. Have them pick the top three things they want or need and place them back on a new "Gotta have it!" list in order of importance. To help them prioritize, have them ask the following questions about each item:

1. Do I need this?

2. If not, do I at least really want it and will I still want it tomorrow?

3. Is this something I must buy now or can I take some time to think about it?

4. Am I sure that it will get used or worn frequently?

5. If I buy it now, will I have enough money left to buy the other things I'll need soon?

Everything that does not pass this test is taken off the list.

Next, talk about what fell off the list. This conversation will help your child understand how having a list helps them manage what they truly want or need before they make a purchase they may regret.

Help them set a spending goal by asking them to highlight one item on the list that they would like to earn money toward.

Let them earn what they spend

Next, it's important to provide opportunities for your kids to earn their own money, outside of and in addition to allowance money.

Younger kids can help shovel snow, sweep walks and put groceries away when you get home from the store.

For older children, that means getting a job, which can be inside or outside the home. This can include babysitting, serving and cleaning up at a family party, driving and running errands or walking neighborhood dogs.

The payoff

What has happened with a "Gotta have it!" list and a little prioritization? Yep-delayed gratification. By showing your kids how to delay a purchase by making a list and earning the money they spend, we show them how to be a smart spender.

They say that the "best defense is a good offense." Lists, prioritization and earning the money they spend is the best offense I know of to get our kids ready for the big college game of life!

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Susan Beacham is the founder and CEO of Money Savvy Generation, a financial education company that provides innovative products and services to help parents and educators teach children the skills of basic personal finance, E-mail her at

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