Back-to-school shopping can teach kids about money

Back-to-school shopping brings many unknowns, but one thing parents can count on is that it's going to be costly.

The U.S. Census Bureau recently reported that $7.7 billion was spent at family clothing stores in August 2011. That's up from $7.4 billion the year before, and many analysts believe numbers this August will be even higher.

One study from the National Retail Federation estimates the average family with kids from kindergarten through 12th grade will spend almost $700 on back-to-school shopping this year.

Looking on the bright side: Financial experts say back-to-school shopping offers a valuable opportunity to teach kids about money.

Shane Jennings, a financial adviser at Edward Jones in Abilene, said he knows from his experience as a parent and a financial expert that using every opportunity to teach kids about money pays off in the long run.

"From a business standpoint, I see people coming in all the time, some college age and young adults, some may be older, 30s, 40s even 50s," Jennings said, "that never got any training on anything financial. Not just investing, but budgeting and just the basics. So I think it's really important for every parent to make an effort."

Children generally aren't taught financial basics at school, Jennings said, so it's important for parents to take on the role of financial adviser at home.

He said "financial basics" means learning how to earn money, how to save money and how to give money away to charitable causes.

Back-to-school shopping offers a great opportunity for parents to teach kids how to budget, said Jennings, the father of a freshman and a senior in high school.

Simply sitting down with a child to explain how much money is available for back-to-school expenses and allowing them to help make decisions about what needs to be purchased can make a huge difference in how smoothly the shopping goes and in the financial future of a child, he said.

"Budgeting is spending money on paper before it's gone, so you can see how your plans work out," he said. "Can you get everything you want on the list for the money you have allotted for it? If not, prioritize."

Setting priorities with spending is something that comes naturally for parents, but oftentimes isn't considered by children. Rather than just telling kids "no" when they ask for a specific item, experts suggest using their pleas as an opportunity to explain budgeting and financial priorities.

"The why behind it is what is lacking for 99 percent of us, and we're guilty of it, too," Jennings said of himself and his wife. "A lot of times we would just say no without explaining the reason why. School shopping is a good time to allocate money and let them learn to make choices."

That means letting children make poor choices, too, he said.

Jennings said he and his wife made it a habit to give the children small weekly allowances when they were younger. They gave 10 percent to their church, set another 10 percent aside for savings, and were allowed to spend the rest freely.

"If they wanted to spend all their money on a toy that's going to break the first time they use it, we'd let them do it," he said. "They learn the lessons of 'think before you spend.' "

Teaching kids those lessons early in life does not guarantee financial success later in life, he said, but it does improve the odds.

"Anyone who starts out life understanding the importance of avoiding debt and the importance of spending money on paper before they go out and spend it, they're a lot more likely to avoid the pitfalls out there financially," he said. "Debt is the biggest killer. If you don't spend money on paper first, that's what gets people in trouble. They spend money impulsively."