Lesson 18: Teach Your Kids to Save vs. Spend
Financial Life Lesson: Saving vs. Spending
For elementary ages:
If we know that every choice has an opportunity cost, does the decision to spend or save our money also have an opportunity cost?
Of course it does! So, how do we decide? We apply our question: “What is the wise thing for me to do?” In order to do that, we have to define what “wise” means as it relates to money; financial wisdom, as it were!
Help your kids understand that being “wise” with money means thinking about more than what makes them “happy now.” Each decision with money should not be made quickly. You are being wise when you consider the opportunity costs involved.
Have the kids write down an annual goal (or two or three) for their money.
For Middle Schoolers / Teens:
For older kids, the same advice on opportunity cost applies – the decision to spend or save carries with it an opportunity cost.
Now, even though this question works when thinking about any and every decision, what does “wise” mean when we are talking about our money?
In this context, “financial wisdom” or “wise” refers to habits, circumstances and goals. Ask them to consider their past experiences with money, their current circumstances in regards to money, and their future hopes and dreams that will require money. Given those things, ask them to answer: What is the wise thing to do?
Have the kids write down an annual goal (or two or three).
With elementary school kiddos we want to start weaning them from “happy now” and get them to consider “delayed gratification,” which we’ll discuss further in a later lesson.
With our middle schoolers and teens, we really want to impress upon them the use of this question — then coupled with opportunity cost considerations. We want to wean them from asking things like:
- “Is it wrong if I spend the money?”
- “Is it bad if I spend the money?”
- “Am I doing anything illegal by spending my money?”
Of course, the answer is “no.” It’s just a form a self-justification. However, if you have them apply the question “Is it wise?” they are forced to consider their best interests.
Whether or not they make the right choice, they will immediately know what the right choice is!
September 2018Contact Author