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5 Reasons You Should Only Give A Small Amount Of Money To Your Kids

5 Reasons You Should Only Give A Small Amount Of Money To Your Kids

As parents, most of us want our kids to have nice things, and enjoy the benefits that money can bring.  For many of us, it is very tempting to offer our kids the sort of luxuries we might not have had the opportunity to experience when we were growing up.

Seeing the smile on your son or daughter’s face when you surprise them with the latest toy they have been talking about non-stop, or an excursion they have been dying to go on is a priceless feeling.   Nothing is better than spreading joy to a child.  However, is there such a thing as too much giving?

It’s understandable that parents would like to give the best to their kids, but when treating your children to gifts and surprises too often, potential problems can arise.  This is especially true when it comes to money.  Here are five reasons why you should only give a small amount of money at a time to your kids, even if you’re rich:

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1. Spoiling your kids can lead to poor behavior and attitudes later in life

David Bredehoft argues in his studies on Childhood Overindulgence and Young Adult Dispositions that overindulging your children by giving them too much money, or toys can result in dysfunctional attitudes as they transition into young adulthood.

In his studies, the more spoiled a child was, the more self righteous they were likely to believe themselves to be.  Furthermore, children that had been over indulged tended to see themselves as less effective than the children from other groups.

2. Teaching your kids about wants versus needs

Whenever kids have too much money at a time, it is all too easy for them to satisfy every desire on a whim.  Every child will naturally want the latest toys to come out, like a gaming console, or perhaps the new iPhone that just hit the market.

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This is normal behavior, as constant bombardment by the media practically trains our children to seek out these luxuries.  Because we live in a society that rewards instant gratification, it is important to instill in your kids the differences between wants and needs at a young age, so as to prevent bad spending habits later on in life.

One way put this concept into perspective is by explaining the amount of work required to obtain the money for a specific purchase.  For example, if your child learns that it takes an average of say 30 hours of work to buy a Playstation 4, ask them how willing they would be to work that many hours, on top of the amount of time it takes to pay for things like food and shelter.  This can help them to appreciate the amount of extra work necessary for the luxuries they desire.

3. Giving only small amounts of money imparts big lessons on savings

Building upon the last point, if a child is adamant about wanting something, giving it to them straight away might not be the best decision.

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By setting a weekly allowance, parents can teach big lessons about the importance of savings.  If your child wants a new item, they will have to save up to be able to afford it, which means limiting other purchases.  This will prevent your child from developing the bad financial habit of impulse spending.

Whether or not you require your child to complete chores to receive the allowance is up to you.

4. Kids don’t recognize the actual value of money

With the advent of the digital age, the value of money is becoming less and less recognizable for kids.  With the increased use of credit and debit cards, rare is the case anymore when money is actually changing hands during a purchase.  Without the tangible exchange of paper money, it can often be difficult for kids to realize the significance of the spending that is occurring.

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A recent survey by T. Rowe Price on brandable domain names reports that while 60% of kids say they participate in online shopping, almost 75% rarely, if ever, go to a bank.  This disconnect between the purchases our children are making, and the actual financial institutions that facilitate them is troubling, to say the least.

By making your kids give you real paper money in exchange for the use of your credit card for an online purchase, you can help them to realize the value of the money they are spending.

5. Giving your kids too much money can build the wrong sort of expectations

Giving your kids too much money may be setting them up for failure from the start.  Kids who have constant access to money will quickly become accustomed to a certain sort of lifestyle, and they may continue to expect it as they grow older without ever learning the action necessary to maintain their desired standard of living.

What happens when they are released into adulthood and no longer have an endless supply of money to support them?  Certainly the results are not pretty.  The best strategy is to limit the amount of money your kids have from the start.  This will prevent attitudes of entitlement from ever developing, and limit the false expectation that the gravy train will keep on rolling forever.  Your kids will learn that there is no free ride in the real world, and instill in them a work ethic that will benefit them for the rest of their lives.

Featured photo credit: Spc. Bobby Allen via flickr.com

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Published on September 17, 2018

How Being Smart With Your Money Leads to Financial Success

How Being Smart With Your Money Leads to Financial Success

Achieving financial success is not something that just happens. Maybe if you win the lottery or something, but for the average person like you or me, it comes from a series of small steps you take over a long period of time.

With each step, you form a new smart money habit. And with each smart money habit, you build towards financial independence.

So what sort of habits can you form to get on that path? Let’s take a look at smart money habits you can start today to get you closer to a financially independent future.

1. Avoid being “penny wise but pound foolish”

It’s tempting to try saving a couple cents here and there when buying small items. However, that’s not where the real money is saved. You’re putting in extra effort for something that doesn’t move the needle.

You get the most bang when you’re able to cut down on your bigger bills. For example, finding a lower interest rate for your mortgage could save you $50+ per month. And cutting your transportation bill by purchasing a cheaper car or taking public transportation can provide large gains as well.

So, look at your recurring expenses such as housing, transportation, and insurance, and see where there’s wiggle room. It’s a much better use of your time than trying to pinch pennies here and there on smaller purchases.

2. When you want something big, wait

Impulsivity can get you in trouble in most aspects of life. Finances are no different.

It’s human nature to see something and want it right then and there. It starts as a kid in the checkout line at the grocery store, and it continues on through adulthood.

We get an idea in our head of something we want, and it’s hard not to go out and get it right then.

A good example is wanting a new car. Perhaps you’ve had your car for several years. It’s crossed the 100k mile mark. Maybe maintenance is due, and you’re annoyed that you need to replace the timing belt or purchase new tires.

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So, you get the itch.

You start digging around online, and you realize you could trade in your current car for something newer and more exciting… all for a few hundred bucks a month. Then you get obsessed.

Here’s where you have to take a step back.

Your newfound obsession is clouding your judgement. Rather than giving into the impulse, wait it out.

Set a timeframe for yourself. Maybe you come back to the decision three months down the road. See if the obsession lasts.

It might, but often, a funny thing happens. Often, you forget about it. And often, you find that the new car wasn’t a need at all.

The impulse faded. And you just saved yourself a ton of money.

3. Live smaller than you can afford

You finally get that big raise. And you want to celebrate – and why not?

You’ve been looking forward to this forever. And after all, it was all due to your hard work.

That’s fine, splurge a little. However, make it a one-time deal and be done.

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Don’t get caught in the trap that just because you’re now making more money, you should spend more.

Too often, people get more money and feel like they that gives them the means to buy a bigger house, a bigger car… you know the drill. Resist.

The fact is that living smaller than what you can afford is one of the fastest ways to build savings.

But if you constantly upgrade as you begin to make more, then you’ll never get ahead. You’ll just build up more debt along the way and have just as little wiggle room as before.

4. Practice smart grocery shopping

Food… it’s one of the biggest portions of any budget. And if you’re not careful, it can be one of the biggest drains on your wallet.

But luckily, there are a few things you can do to ensure that you stay smart with your money when buying groceries.

Create a grocery budget

Set a strict weekly grocery budget. When you know how much you can spend on groceries, you can then plan your weekly menu around it.

Once you know what all you need, you can go shopping and keep a running tally as you shop to ensure you’re on track.

I tend to do this in my head, rounding for each item. However, writing it down as you go would probably work best for most people.

Make a list… and never deviate

Never go to the grocery store without a list. If you go to the store with a ballpark idea in mind, you don’t have a true ide of what you need.

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You’re not well-researched. You don’t know what the sales are. As a result, you’re going to make decisions on the fly.

These impulse decisions will lead to overspending, which will derail your grocery budget.

Eat before going grocery shopping

It’s also important to eat prior to going to the grocery store. Hunger is a powerful force.

If you’re shopping on an empty stomach, everything is going to look good. In particular, you may find a lot of ready-made, processed snacks will look enticing.

After all, you’re hungry now and that food is easily available. So subconsciously, you may lean towards those items.

Unfortunately, not only are those items typically less healthy, but they’re likely more expensive. You pay for convenience.

However, when you eat prior to shopping, then you’ll shop with a clear mind. Your hunger won’t cloud your judgement, influencing you to make poor decisions like a cartoon devil resting on your shoulder whispering in your ear.

This makes it much easier to stick to your grocery plan.

5. Cancel your gym membership

Now that you’re all set on your food, it’s time to get smart about managing your budget in terms of physical fitness. And let’s begin by avoiding the gym. The gym bill, that is.

The average gym membership costs around $60 per month. That’s $720 a year.

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Yet, two out of three gym memberships go unused. That means two-thirds of people who have a gym membership are literally giving away almost a thousand bucks a year. It’s crazy!

I recommend seeking an alternative. One good alternative is to look into fitness streaming services.

Streaming services allow you to stream hundreds of workouts like Insanity and p90x, right in your own home for around $10-20 a month. That’s $40-50 less a month than the average gym membership.

Of course, then there’s the free option. The internet is full of free workouts that you can do on your own with minimal or no equipment.

For example, there’s the Couch to 5K program, that I personally used a decade ago to ease myself from couch potato to running my first 5K race. If I could do it, anyone could.

Then there are free resources like reddit that have limitless information on workouts. The Fitness subreddit has done all the research for you, populating workout tips and detailed workout routines for anyone to use in their wiki.

There are several routines that require no equipment. And you can join in on the subreddit to become part of the community, making it easier for those seeking comraderie and encouragement in their fitness goals. All for free.

It’s baby steps… And baby steps can start now!

I’ve never met anyone that can’t stand to be a bit smarter with their money. And on the flip side, anyone can get smarter with their money. But remember, it doesn’t happen all at once.

Begin by fighting your impulses. Prepare for the week and be smart at the store. And cut monthly expenses like gym memberships that are overpriced and you probably aren’t getting your money’s worth out of anyway.

The devil is in the details. And the details can change your lifestyle and prep you for a financially independent future.

Featured photo credit: Unsplash via unsplash.com

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