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Dad Cents – Family Life Radio ministry spotlight
Today’s Father radio program featuring content from Dad Cents article “Needs vs. Wants.”
Today’s Father radio program featuring content from Dad Cents article “Scarcity.”
Money Management for Kids
Parents play a vital role in equipping their children to make wise decisions with money. The teaching process entails concepts like debt and credit as well as broader money management tips like the difference between luxuries and needs.
Shane Barkley sees these teaching opportunities a little differently than most. While the monetary concepts are important, the author of “Dad Cents” explains that money management for children really starts with teaching them about positive character traits.
Money Management Tools“Dad Cents” author Shane Barkley says the first money management tools kids should learn are character traits, which also apply to other areas of life such as academics:
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“The character we show in how we utilize money is same throughout all the rest of our life so the cool thing is when you teach kids about money, you’re teaching them about life,” he says. If a man isn’t faithful, he says, how long do you think he will have a job? If a man isn’t trustworthy, how can he be trusted with a credit card or a computer?
Parents can help establish these traits by guiding their children in accomplishing tasks. When a child performs jobs for neighbors, such as mowing the lawn or shoveling snow, a parent should check on them and help them determine when the job is complete and if it has been done well, Barkley says. This will help the child understand what it takes to be faithful, trustworthy and accountable.
Teaching character traits applies to other aspects of life, including academics, he adds. But, for it to work, the teaching must be intentional, Barkley says. Parents cannot rely on the “learn by example” method alone for teaching kids how to spend wisely. “It can’t just be kids watching. We give as many bad examples as good examples,” he says.
A parent’s first step, though, is solidifying his own understanding of financial concepts. Barkley says it is fine if parents find they don’t understand everything about personal finance and must learn alongside their kids.
One crucial concept for kids to understand is the difference between needs and wants, Barkley says. Lines between the two become easily blurred. Barkley suggests having daily conversations with your kids on the topic of wants vs. needs. When they use the words “want” and “need” question them on why they chose that word. Challenge them on whether something truly is a need or a want.
Barkley advises teaching kids that if you are more efficient with your money, then you have more money to do fun things. By eating at home rather than at a restaurant, there might be more money to do something more fun later.
Two ideas can help with understanding needs and wants, Barkley says:
Opportunity costs: Children can learn the impact of money by examining opportunity costs. Show them what they are giving up by the choices they make. As an example, tell them they have $10 and they can either go to a movie, get gas for the car, or eat at McDonald’s. Examine their choices and the ramifications.
Concept of scarcity: When you have to limit what you buy, needs vs. wants becomes terribly important, Barkley says. Say, for example, that the child wants a $100 pair of shoes. Ask them what they would do if they spent $50 on shoes and had $50 left over. Once kids get older, actually give them the money to spend.
“Kids make better choices when money is in their hands,” Barkley says.
These articles are posted on the National Center for Fathering website, www.fathers.com.
Helping kids distinguish between needs and wants.
The Luxury Marketing Council of Florida says that luxury spending has seen an annual growth of 20-30%, where general retail spending has seen an increase of 5%. One Encarta Dictionary definition of luxury is “an item that is desirable but not essential, and often expensive or hard to get.” Translation: needs are up 5% per year, and wants are up 20-30%!
One of the most challenging traps for our children (and for us) when it comes to money is distinguishing between our wants and our needs. But if we can keep this straight, we’ll be well on our way toward equipping our children to make wise buying decisions for years to come.
So what is a need? Food, shelter and clothing. Generations of people have lived and continue to live with very little money—only a fraction of what most of us live on. That’s the baseline for where we start talking about needs. Living on very little money is not fun for anyone, and that desire for an easier life or the things other people have is what often gets people into financial difficulties.
Obviously, wants are things that our children would like to have. Usually wants come disguised as needs. I need clothes, and this name brand that is 50% more expensive will make me cool. Kids want to fit in with classmates. The problem is that the non-name-brand clothes provide the same basic benefit. They provide protection against the weather conditions.
I don’t have a problem with name-brand clothing, especially when I can buy the clothing at the same price as the generic or discount store option. By shopping around and being patient, I can often find name-brand items—Nike athletic socks or Polo button-up shirts, for example—just as inexpensively as comparable options that are generic. Also, it’s appropriate to account for the difference in quality during the decision-making process.
Because of advertising, peer pressure or a range of other factors, we too easily blur the lines between needs and wants. We convince ourselves that our wants are really needs. I guess I’m talking about us dads now. But our children are watching and learning from what we do. Raising our children with a healthy awareness of their needs and wants means addressing this question ourselves. We need to take a hard look at our financial decisions and priorities.
Is it wrong to have some things that are “wants” and not “needs”? Probably not, although that’s really a question that you, your family and your budget will need to settle between yourselves—and each family’s priorities and financial situations are different. But I will say that it’s dangerous to start thinking about pursuing things that are “wants” if there’s no bigger plan and a limit for your spending in place. It’s just too easy to go overboard.
So, like with many areas of fathering, your modeling is huge. To be more proactive in teaching your children about wants and needs, I recommend having regular conversations with your kids as teachable moments come around. Whenever they use the word “want” or “need” in reference to something, question them on why they used that word. Is it really a need, or a very strong desire? What likely caused that desire?
If your children can get a good grasp of the difference between needs and wants, it will be a big benefit to them for the rest of their lives. We can usually communicate the ideas pretty simply, but applying the ideas to real-life wants becomes very complex. So it’s vital that we’re intentional with this. And there’s no substitute for spending time with your children so you have those needed teachable moments.
ACTION POINTS:
- When you shop for groceries or clothing with your child, find two items that are virtually the same except for the brand name. Talk about the difference in price and which one you want versus which one will meet your need, and what other factors (quality, fit, taste, etc.) affect your decision.
- The next time your teenager wants a new pair of jeans or shoes, give him the money to buy a reasonably priced pair. Then tell him that he can keep any money he doesn’t spend on the item. This will allow him to weigh needs and wants, priorities, and many related issues as he makes his buying decision.
Does your child think money grows on trees?
I face a daunting challenge whenever I take one or more of my daughters to the grocery store. I’m sure you’ve experienced it, too. “Daddy, can I have one of those?” “Daddy, will you get this for me?”
One Sunday, our family was eating a “gourmet” lunch off the dollar menu at a fast-food restaurant. My daughter Jaley asked, “Can I have some chocolate ice cream?” I immediately answered, “No,” and she complained.
Those situations put us fathers in a bad position, where we’re forced to choose between potentially spoiling them by giving in to their every request, or trying to figure out how to keep them from embarrassing us in public with screaming fits. For a while, my daughters really worked me over.
The bigger concept I see at work in these situations is one that too few people today appreciate: scarcity. Scarcity describes the condition of limited resources, and unlimited wants and needs. My daughter Jaley only has a certain amount of money, but there are many toys she wants to buy—limited resources, but unlimited options. Her limited amount of resources forces her to stop and think about which items she wants more, and as she gets older my desire is that she learns to consider bigger priorities that are behind those desires.
A big-picture definition of scarcity is quite different from the definition that we see in everyday life. From a larger — or perhaps a more basic — perspective, we are living in a condition of what you could call unlimited resources. Compared to the material things that many of our parents and grandparents had, we have more than enough for every need that we have and many things we want, although we often think about our “wants” as “needs.” (See one of my other articles for more on that.) We should be viewing our needs as limited. What do we really need to exist in this world? Food, water and shelter (clothing and a roof over heads). If we understand that our needs are limited, we can be content with what we have!
Then there’s the prevailing view of scarcity that we see (through advertising), which says that we never have enough to keep up with our ever-increasing wants and needs. We are encouraged to keep attaining more and more, but we’re forced to make difficult decisions based on limited resources. Many people in our culture do not let limited funds stop them from spending anyway; they simply use a credit card and go into debt rather than having the self-discipline to wait to get what they want. Our children see evidence of this approach all around them, in their friends and in the media.
We need to teach our children about scarcity. They need to learn to make good choices with the money they have, and they need to understand the dangers of not making good choices. How can we do that? Two ideas are important here.
First, our modeling is a key factor, because our children will compare what we say with what they see us do. If our resources really are limited, are we choosing what kind of clothes and shoes we wear based on that, or are we going into debt for non-necessities? Does our approach also apply to the toys and candy that they want? As they get older, they will be more aware of their peers and what their peers have, but their early awareness will come from you.
Second, use allowances as a teaching tool. Surveys show that only 27% of Americans give their kids allowance. Give your children an allowance so they can begin to make choices and learn about limited resources. For those grocery-store situations, my wife and I learned this approach to help them distinguish between their wants and needs. (Actually, it’s an idea I learned recently, but my wife has been using it for quite a while.) We realized that kids will grasp scarcity much more easily when they’re working with their own money.
So, my wife and I discussed a different approach when our daughters ask us to buy things for them. We simply say, “Sure, you can have that ice cream. You can use your allowance to pay for it.” What usually happens is that my daughters will think for just a few seconds before blurting out, “I guess I don’t want any.” They quickly figure out that the ice cream, candy, or new toy is a want and not a need. And the best part is that they make those decisions themselves, so there is usually no complaining.
And even if they say, “Okay, I’ll buy it with my allowance,” I know that’s only delaying the learning opportunity. In a few days or weeks, they won’t have enough money for something else they want, and I’ll just say, “Hmm. I guess you spent your money on other things.”
Over time, they learn that their money is limited, and that they need to make good choices about how they spend it.
ACTION POINTS
- If your children are still young, begin to teach them about these concepts now. It will take time, and the younger your children are, the more opportunities you can give them to learn.
- Explain to your children how money gets into your bank account and emphasize that you do not have an unlimited amount of money.
- With older kids, sit down with them and talk about the house payment, electric bill, and all regular expenditures and how they come out of your paycheck. If you don’t want to reveal your total income, find a way to show them the costs of real life so they will understand limited resources.
- Talk to your kids about debt and the good and bad choices you have made in this area.
Ways to Teach Children about Saving Money
“My son is beginning college in only 3 years!” “My daughter is getting married next spring!” “My son and daughter need a car to drive!”
Those are a few of the many reasons why dads need to save money. As fathers, it’s pretty easy to keep a healthy awareness of our role as providers for our families. Seeing each paycheck arrive in our bank accounts and figuring out how far it will go is an ongoing challenge. And when we look ahead and see those big expenses coming, we don’t need much more motivation that that to save some money when we can.
But as I’m sure you know, most children are oblivious to the reasons for saving. But it’s critically important for them. Many of us have seen numbers when financial planners compare people who consistently save even a little money through the years with those who start saving later in life. The difference between the two end balances is staggering, and we all want our kids to reap the benefits of the “consistent savers.” We need to start educating our children now about the benefits of saving — and give them experiences with it.
Here are four suggestions for how to do that:
Model good financial principles.
This is where a lot of good fathering starts, and money is no different. We have to show our children what responsible money management is like. Living within our means and saving a portion of our income is absolutely necessary, and I believe the key is an inner quality that shows itself in our actions: contentment. If we have learned the secret of being content in any and every situation — and we demonstrate that virtue in our spending habits and in other ways — then our children are better prepared to make saving a priority. They will see it in us every day, and it will be a natural thing for them to live out when they have opportunities to do so.
Teach them reasons to save.
In general, people save money for one or more of these three reasons:
- to have the opportunity to purchase something in the future.
- to purchase something immediately.
- and what I believe is the most compelling reason: so we won’t have to borrow money for emergencies or surprise expenses.
Talk about those reasons as daily “teachable moments” arise. During the routine of life, your kids will surely ask some pointed questions about your family budget, and it usually happens when they want something that isn’t in the budget. For example: “Why can’t we go out for frozen yogurt this week?” “Can I get new soccer cleats like other people on the team?” “Is it okay to plan my birthday party at the Fun Palace this year?”
I’d suggest giving them answers that refer to your budget, in pretty general terms: “Sorry, but we can only spend so much each month eating out, and that will push us past our budget.” “Well, the extra money this month is going toward building up our emergency fund.” “Instead of spending a lot of money on big parties, we choose to save that money for things we’ll need in the future, like your college tuition.” I read a news story recently where an 18-year-old girl in Ohio had saved $40,000 for college! Read and talk about stories like that with your kids.
Look for opportunities to have those discussions about how a budget works, why you need an emergency fund, why you want to save for future needs, and many other great money topics. Feel free to share about wise and unwise decisions you have made with money. Tell your kids how, as a teenager, you saved a long time for a specific item, and it sure was rewarding when you were finally able to afford it. When you’re planning to make a significant purchase, let your children in on the process you go through to research the item, including what criteria you used to make your decision, and then save the money to buy it. Too often, kids only see their fathers making the purchase, and they come to believe that dad has enough money to buy anything!
Use terms your kids can understand.
The reasons why you save money may seem obvious to you, but please be patient as you have these discussions with your kids. Children need examples they can relate to. Also, your kids probably have a very limited concept of time. They may not have had to replace anything major, or watch you go through the process of paying for a new engine on your car, a new furnace for your home, or some other big expense. They can’t really grasp the fact that they will probably need thousands of dollars to go to college in eight or ten years. They probably can’t imagine what it means to retire, much less the amount of money needed for it.
Give them opportunities to learn the benefits of saving.
I strongly believe that kids learn about money best by having experiences with it — small amounts at first, and then increasing as they mature. And they learn best when they perceive that it’s their money that is being saved or spent, not yours. They will be more thoughtful about their decisions if it’s their money. They might acquire that money from a variety of places — gifts from Grandma or someone else, earning it through work, or allowances.
With their own money, it also makes your life a bit easier. When you’re at a store and your son starts begging you for something that isn’t among the things that you would normally provide — or it isn’t in your budget — you can simply say, “Did you bring your money?” Or, “Maybe you can save your money for that.” And that ends the conversation. You can take on the role of a financial adviser: “Sure, you can have that. It will only take 2 months for you to save enough allowance money for that.” Or, with older kids, “Maybe you can do some odd jobs for the neighbors to earn the money.”
If your kids are like mine, once they have some money, reality will set in very quickly when they face tough decisions and resist spending temptations. In grocery or convenience stores, the candy is perfectly placed at kids’ eye levels. Your kid(s) will begin to wrestle with the desire for the candy (immediate gratification) with saving for the toy (future satisfaction). It’s good for them to experience that early in life, while the price tags are still pretty low.
Of course, you also want them to learn about the power of saving money and seeing it grow — with interest — over time, and even benefit from their savings at some point. Maybe your child will want to use his savings to buy a car or a computer for school, or he can make a major contribution to his college tuition bill.
The goal is to raise children who are self-disciplined and confident with their money managing skills, and who avoid being dependent upon financial institutions. Your children may not grasp all of the issues you are considering when you save, but they will learn from watching you and seeing the results of your savings. If you cannot explain to your children why you are saving, they will have difficulty grasping the concept for themselves.
Action Points:
- Begin an allowance so your children can begin to save.
- Take your child to pick out a toy they want, and help them come up with a plan to save for it.
- Share with you children about items or projects for which you are saving.
- Tell your children some stories of how your past savings or lack of savings has impacted your life.
- Show your high school kids how much college costs and how much the tuition is increasing every year.
- Encourage your kids to find ways to earn extra money.
- Have your kids save for a portion or all of their first car.
