Good Money Sense in an “I Want it Now” World

When my niece was all of six, she asked for an iPod for Christmas.  Not some kid-sturdy version of a CD player to carry around.  Not even a plain old mp3 player.  Specifically, an iPod.  Thanks to my sister-in-law’s good sense, she didn’t get it.   But the fact that she knew to ask for an expensive brand name piece of electronics astounded me.  I guess it shouldn’t have; between what they spend themselves and what they convince their parents and grandparents to spend, American children have influence over nearly $1 trillion each year—and Madison Avenue is well aware of it.  Like it or not, your children are their latest and greatest marketing niche.

But the marketer’s dream can be our nightmare.  Who hasn’t experienced the shopping aisle meltdown of a child who thinks you are the meanest parent in the entire world for not letting him get that new toy on TV?  Or tried to reason with a teenage girl who very seriously believes her life will be ruined by wearing clothes from the wrong store?  With the average child exposed to 40,000 commercials each year, being manipulated by some of the greatest minds in business, it can seem like a losing battle for parents, especially when free-spending teens grow into young adults with poor financial habits and skewed perspective.

What does the future hold for young people who embrace a consumer lifestyle that is harmful to their long term financial health?  Constant exposure to the message that they deserve a fantasy lifestyle unfortunately will lead many young adults to try to have that lifestyle even when their salaries can’t come close to keeping up.

Some startling results from a USAA survey– High School Confidential: An Inside Look at Teens and Money:
o    Teens– half of whom aren’t earning their own paycheck– are spending nearly as much in “fun money” every month as their parents.
o    One in five teens expects to earn $60,000 or more at their first full-time job after high school or college.
o    Nearly two-thirds of teens expect to be millionaires in their 40s or younger.
o    Forty-two percent of teens expect to retire by age 60

The state of our economy presents us with an opportune financial teachable moment:  facing the effects of a society that has lived beyond its means.  Take the opportunity to give your children an understanding of financial realities, and teach them to make responsible choices with money.  A pile of birthday money without a plan will soon be frittered away, and kids need to understand that they can choose to do several things with that money:  they can share it, save it, spend it, and pay taxes with it.
Sharing— Being aware of the needs of others is an effective antidote for materialism.  Children who are exposed to the need around them, in the community as well as the world at large, will have an easier time resisting the temptation of a $90 pair of jeans.  Giving to meet those needs and seeing the joy it brings others is a feeling that can’t be matched by any pair of jeans.  Encourage your kids to be purposeful rather than random about their giving, deciding on an amount or percentage to give and where they would like it to go.

Saving—Teach your children to save at least 10% of their income, whether it be from allowance, gifts, or a job.  Aside from the obvious benefit of having savings, developing that habit will encourage them to live within their means.  Offer rewards for milestones in their savings, such as a monetary match or a family outing.

Spending—Help your kids recognize the difference between needs and wants, and choose their spending accordingly.  When my kids first started making spending decisions, we had two rules:  first, always wait at least a few days to make sure you’ll still want it after the mood passes, and second, search for coupons and sales before buying anything.  Have them list three other things they could do with that money before actually spending it.  Teach them to use credit responsibly.  They will be inundated with offers of “easy” credit, and they need to understand the consequences and the real cost of that credit.  They also need to know just how valuable their credit score is and how to protect it.  Let them try out credit with a loan from you for something they want, and if they default, repossess it!  Better to learn by losing a small item now than a car later.

Taxes—Sooner or later, we all learn that along with the privilege of living in this great country comes the privilege of paying taxes.  Don’t wait until they are disillusioned by the take home pay of their first paycheck to teach them about it; collect a family “tax” on their income and use it for something for everyone’s benefit such as a family trip or activity.

Take heart, parents, you still are your children’s greatest teachers, despite what your teens tell you.  Don’t let the only messages they hear about money come from others with an agenda.  The key though, is taking the time to communicate your financial values to your children.  Spend some time reflecting on your personal financial philosophy.  By being clear with yourselves about what your values are and what you want to model for your children, you can go a long way in countering the influence of a consumer crazed culture.

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2 Responses to Good Money Sense in an “I Want it Now” World

  1. Rick Stryker July 13, 2012 at 12:05 pm #

    Erin- Great stuff and I really enjoy your site. You had me this time all the way to “collect a family tax.” Not only would I have had to sleep with one eye open forever after, but I’d have felt much like I had gone over to the dark side. While I believe that the understanding is valuable, family membership has its privileges, to coin a phrase. I’d offer that a better way to achieve that same aim – understanding that making a family (a microcosm of a society) work costs real dollars – might be to let the youngster buy dinner for the family some time. Illustrates the point, makes them feel important, but doesn’t charge them for the space. At the same time, paying bills for which they are directly responsible – damage to the car, etc, well, I’m all for that!

  2. Erin Baehr, CFP® July 26, 2012 at 10:53 am #

    Thanks Rick! That’s a great idea. I’m with you too about paying for car damage and things like that. Tough life lessons, but best learned while still safely at home with family.

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