What To Do With All That Cash

Did your kids receive gifts of cash for Christmas? If they haven’t already spent it, they may be trying to figure out how to extinguish that fire burning in their pockets.

Kids love the freedom, independence, and power that comes from spending their own money on items they’ve hand selected. These experiences are great, teaching kids to make decisions, manage money, and live with the joys or consequences of their choices.

However, before heading to the store, have a conversation with your child about his thoughts on where the money should go. I recommend giving kids three separate piggy banks: a spending bank, a savings bank, and an offering bank. Allowance money should typically be divided between the three banks (I let the child decide how to split the amount between the banks, but that is a topic for another post). You and your child can decide if gift money, or other special occasion money, also needs to be divided or if it can just be spent on something fun.

Discuss what type of purchase your child has in mind. If she has been saving for a particular toy, her Christmas money might allow her to make that purchase. Perhaps she received a large sum, but just wants a few inexpensive things, like a Littlest PetShop figure or a Zooble. In that case, talk to her about taking a little money to the store and saving the rest for the next time she’d like a new toy. If your child has no idea what she wants, ask if she would like to start by looking at toys, clothes, books, etc. so you have an idea of where to start shopping and she can start making a mental plan. Wandering around Target looking for something to buy is not usually the best plan. When kids do this, they tend to make impulse purchases they later regret. I am in favor of doing this with a little bit of money because it teaches kids to be more thoughtful in their purchases, but protect them from the huge disappointment of wasting ALL of their gift money on an unwise choice.

Also, let your kids know that you always have the final say on a purchase. It does not matter that it is the child’s money, as the parent you do not have to let inappropriate clothes, music, video games, toys, or anything else into your house. Don’t censor a child’s purchase because you think it is silly or unrealistic (although you should gently ask questions about such items to help your child evaluate the true value of the item), but do stand by your morals and let your kids know when items cross the line.

By taking the time to discuss your child’s shopping goals before heading to the store, you are likely to have more fun and your child will have a better money management experience.