Ever since Jenn and I had our I Have Had Enough Moment with living paycheck-to-paycheck and B-R-O-K-E and living the three-time-loser-with-credit-cards life, we have made it a huge priority to teach our daughter about money management. It became a HUGE priority when we realized that she has inherited my "spender" genes!
In this series, I will be sharing some practical ways that we are teaching her about sound money management.
Part One – Twenty Dollars
We recently embarked on the largest and longest vacation of our lives. We traveled from South Carolina all of the way to far western South Dakota via car. The trip consisted of a week at a fishing cabin in northern Minnesota and a week hitting all of the tourist destinations of South Dakota.
As with any type of vacation, we knew that we would be encountering the tourist traps just waiting to take money from our pockets and put it into their pockets. This has been a source of frustration in the past because our daughter would see something she just had to have and begin a full-tilt marketing campaign to obtain it. It starts with asking mom. When referred by her mother to speak to dad, she spins the statement by saying, "Mom said I can get it if you say it is OK." This spin is done to make me clearly understand that I am the bad guy if I say NO and that I am the only barrier to achieving the acquisition of said trinket/junk/trash/souvenir.
Well, I came up with the PERFECT solution for the problem. Jenn and I gave our daughter twenty dollars at the start of the vacation with the following rules.
- When it is gone, there will be no more.
- You can spend it however you want.
- We will not question your purchase, but we will answer any questions you have.
- You can save the money if you want.
The result? Stress-free walks through the tourist traps. On several occasions, I even saw her pick up an item to purchase it and then put it back down. One time she had picked up the bag to fill up with painted rocks (painted rocks! what an idea!) and she put it down, announcing, "They are really pretty, but they would just sit around at home."
Did she save any money to bring home? Nope. She is a spender through and through, BUT she followed the rules and it prevented a lot of frustration.
Here are the lessons I think are being learned or reinforced:
- Money is limited. If you spend it all now, there will be nothing left in the future.
- Cash limits impulsive spending. For spending categories that are susceptible to impulsive purchases, it is very helpful to plan ahead and take cash. You can not overspend cash.
- Opportunity cost. If you buy a particular item, what was the next best thing that money could have purchased.
- She is a spender. It is very helpful to recognize your own spending behavior. My wife is a super-duper-saver. She saves money. She hates to spend money. I am a HUGE spender. Check that. I am a reformed-spender.
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