"I really, really, really want it!"
If you're a parent, you've probably heard it a million times.
But are you setting your kids up for future financial failure if you go out and get them what they want, when they want it?
"It's so easy for us to want something then put it on a credit card and it ends up being on there for a year or longer," Ben Belanger, of Belanger and Associates of Ameriprise Financial Services, Inc., said.
What is the key to avoiding that as an adult? Delayed gratification when you're a child.
"If it takes six months, they're going to learn that they really need to save their money and work towards that goal," he said.
Belanger offers these 5 tips for teaching your kids good money management skills at any age:
- All Ages: Saving. Set up a savings account and have them monitor their balance to learn how to manage money in an account versus saving in a piggy bank at home. They will begin to understand how the banking system operates.
- Ages 3-5: Instill in them delayed gratification. This is a lesson even kids as young as 3 can understand. Teach them if they want something they have to wait and save for it. Have them set a goal for something they want. Encourage them to earn money doing small chores and help them to save their money to go toward their goal. Once they finally earn enough to purchase the item they worked for, they will grasp the concept of delayed gratification.
- Ages 6-10: How to make wise choices with money. Teaching them about how much things cost. Include them on regular shopping trips such as groceries or school clothes. Explain to them about items being on sale or how two items may be of identical quality, but one is less money. Then ask questions like "If these are the same price, which one should you buy?" Send them into the store with a budget and a list of items needed, so they can learn to shop for all the items they need while staying within budget.
- Ages 11-14: Explain the concept of saving versus investing your money. Explain what interest is and how it works. Teach that the sooner you begin saving, the more money you will accumulate. They can understand this through simple math problems done together. For example: If Johnny invests $100 now at age 15, in 20 years he will have x-amount versus if Johnny invests $100 at age 25, he will have less at 40. They will see the two different balance amounts and see the benefit to begin saving/investing sooner rather than later. Also this is a good age to begin shifting the mindset of saving from short term goals to long term goals (whether it's a toy they want now, or a car they will want when they turn 16).
- Ages 15-18: Understanding debt and credit. Teach them about spending and credit card use. Many colleges students incur significant credit card debt. Teach your child to only use a credit card for an amount you can immediately pay off. Encourage them not to use a credit card for everyday items but pay cash instead, saving the credit card for emergency situations. Explain how credit can affect your future and how missing payments can negatively impact you, what a credit score is and what it means.
"There is no one size fits all when it comes to teaching your child about finances. Parents know their children best and should tailor these ideas to fit their child's individual personality," Belanger said.