I write a weekly column, "Questions Parents Ask" at Lifeworks.com. I have been authoring it for nearly two years. There are themes which return repeatedly, especially around hallmark calendar dates.
I thought it would be relevant to repost this particular column on my blog.
The financial demands put on parents leading into the holiday season (by their children as well as by the parents themselves) can put tremendous strain on a family budget.
Trying to find different and believable ways to dodge questions about expensive presents - and whether Santa will bring them, and why other friends have them - can be exhausting.
This column hints at a couple of ideas which can - especially when reinforced over an extended period of time - help ease the burden.
Flashy electronics that are coming down in price, combined with peer pressure, and school extras “all the other kids have” (iPads are becoming more and more prevalent, but are they necessary?) are pushing parents to buy things they can’t afford for their children.
How do you say “no”?
Keith Donoghue, a financial planner with Assante Capital Management says the first step is to make sure your children have a clear understanding of where your money comes from. That explanation should take place before you and your child are in front of a shelf full of X-Box games.
“You can explain that you go to work every day,” he says, “and for the work that you perform, you are paid a certain amount of money. So each day there is only a certain amount of money that you can spend, as you should never spend more than you earn. Then I would start to explain that there are things that you need to pay for every day before you can buy the latest gadget, toy, or fashion item, such as: savings, rent/mortgage, food, clothing, utilities, the car, gas, insurance, etc.”
He emphasized that savings is first on the list, and that it is never too early to teach your kids to pay themselves first.
Go through the exercise with your children: calculate with them how much they earn through cash gifts, allowances, paychecks, etc. Have them decide how to allocate their funds, beginning with a 10 percent savings, and including setting some money aside for charity. This way, they will better understand the concept of how long it takes -- or how hard you have to work -- to buy a big ticket item.
Donoghue suggests not only helping children understand how they might earn extra cash (shovelling driveways, mowing lawns, babysitting.), but also how to stay focused on financial goals. “If they get easily sidetracked by impulse buys, one trick would be to have them tape a picture of their goal (e.g., a bicycle) to their wallet, so that they see their objective every time they go to spend some money.”
Children have a hard time accepting “no” for an answer. Where finances are concerned, that stubbornness is partly due to a lack of understanding of how hard it was for their parents to earn that money in the first place. You can teach some valuable lessons that could also save you money.