Rachel Cruze, a finance expert who often writes for Dave Ramsey’s website, may know a whole lot about personal finance, but that doesn’t mean it’s easy to teach others, especially children, some of the most important steps about money. But as both a finance expert and a parent, teaching children about money is part of her role. Recently, one summer, she and her husband found themselves in the position to teach their kids some necessary lessons by instituting a “no-spend summer.” Here are the lessons they learned.
To explain how this summer came about, Cruze shared that her children are finally old enough to earn a “commission” for their chores — different from an allowance, she said, because it’s tied specifically to tasks they must complete. While the kids were very motivated to earn cash, having money in hand naturally made her kids want to spend it.
Cruze and her husband felt that their children were becoming overly driven by material desires and impulse buys and bothering their parents about what they could buy incessantly. Cruze and her husband felt they needed to put a lid on these urges, thus instituting the “no-spend summer.”
Drawing a Hard Line
The rules of the “no-spend summer,” were that their kids could not spend any of the money they’d earned at all that summer (though their parents could still spend money as needed). As a reward for their patience and maturity to save their hard-earned cash, their parents would double the amount of their savings by the end of the summer.
Here are the three main lessons this summer taught them all:
How To Avoid Impulse Buying
Kids are driven by their impulses until they’re old enough to know better, and it’s up to adults to teach them how important it is not to spend every dollar as soon as you get it. While she said it wasn’t always easy, Cruze felt good teaching the kids that just because you want something doesn’t mean you need to get it right now. She referenced a statistic that Americans currently engage in impulse spending to the tune of about $276 every month, or $3,312 per year.
The Power of Saving
While her kids are getting a little boost with their parents matching their savings, the children also got to see how their earned money added up over several months and how much of a difference not spending made. Since some employers do offer matching funds in retirement plans, however, even matching their children’s savings could set a good precedent for when her kids grow up and work for an employer. She plans to teach them about compounding interest later, which comes with investing, and feels like she’s laid the groundwork for this important step.
Probably the biggest takeaway from the no-spend summer, Cruze said, was ultimately not tied to finances at all. By setting firm boundaries around spending, kids (and anyone really) can learn how to appreciate, work and play with the things they already possess. In addition, it can force you to spend more time being creative. Cruze’s kids wound up having a ton of fun without always looking to buy the hot next toy. She felt that they wound up making important memories and appreciated what they had so much more. And that lesson extended to Cruze and her husband, as well.
Try a ‘No-Spend’ Time Period
Cruze said that if you want to institute a similar strategy with your own kids, you don’t even have to do an entire summer. You could pick whatever time period works for you and start small to see how it goes. You can also impose one on yourself or your family — it’s not just for kids. Noticing how much you save when you don’t just allow yourself to buy whatever you want can be a wake-up call for many people’s finances.
Educate Your Kids Early
Don’t think that your kids are too young to learn about finances. There are many age-appropriate ways to help kids learn the essential concepts they’ll need as adults. A few basic strategies can include:
- Use a clear jar to save money. A clear jar lets kids visually see their money grow.
- Explain opportunity cost: For example, “If you buy this toy, we won’t have enough for the movies with your friends.”
- Teach them contentment: As Cruze explained above, contentment is learning to be happy with what you have, be creative and use your imagination rather than relying on an external item to bring happiness.
- Consider a checking account: When they’re old enough, open a checking account for them and teach them to use it and balance it.
- Teach them the danger of credit cards.
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