Learning Budgeting from Children

Children are like wet cement. Whatever falls on them makes an impression.

— Haim Ginott

A few years ago, we were vacationing for two weeks. At the end of the first day, we were thoroughly enjoying ourselves. The weather was great, the coastline was beautiful and meals were delicious. However, there was one big problem.

The city has a small downtown area of shops and restaurants. Depending on your point of view, you might call it “the usual tourist trap”, but at any rate, it is so centrally located that it is not possible to avoid it for two weeks. We found it quite enjoyable to browse through these shops because many of the buildings are right against the river and most of the shops are quite easy going. (Kids OK. Dogs OK. Bathing OK. Coffee OK. Food OK. Strolling OK. You get the idea.)

Unfortunately, however, the children were driving us absolutely crazy whenever we passed these shops! They kept picking up everything and holding it up and asking us to buy it for them. Since it was only the first day and most of the items held up were total junk, there was a universally negative response from the parents, which was met with an equally negative response from the children. In spite of all the no’s, the continual nagging went on all day. In fact, as the day wore on, it only seemed to get worse. The children were determined to find something to acquire and it seemed they were going to ask hundreds of times about hundreds of items until we relented. It was almost as if some “spirit of consumption” entered their body and said they must not leave without buying something! Obviously, this is very wearing for any parent and we were alarmed that if this continued the whole time, it would ultimately ruin the vacation.

After the kids were asleep that first night we sat down to discuss what we were going to do about the problem. Now one thing we always try to do as a parent is to imagine ourselves as one of the kids and try to understand exactly what they are thinking. If we are honest, we have to admit that the emotions and actions from children are not usually fundamentally different than that of adults – with kids, everything is just a lot more exaggerated. After a little reflection, it suddenly occurred to us that the kids’ behaviour was not really that irrational after all.

The reason why they were treating their parents like a slot machine was because, in fact, we were acting a lot like a slot machine. We kept saying “no” to them, but there was a hesitation in our voices. Kids always pick up on that immediately. They knew we were thinking about it. Also, we did not care to spend our limited vacation time giving a lengthy explenation for each response and this was interpreted as indecisiveness. So the kids intuitively assumed that mom and dad had no real game plan for what could be purchased and that because we hesitated without explanation on each item, there was a small chance that if you asked enough times with enough items, eventually some request would be granted. And do you know what? They were right! We had no game plan and if we were sufficiently worn down, we would probably just say “yes” to something at some point!

So we formulated and agreed on a simple plan. We were going to give them a framework for buying things themselves. We had no idea whether this would work, but we felt it was worth a try. We still have no idea whether this was good parenting, but we know one thing: it solved all the nagging. Immediately. In fact, we were truly startled by how well it worked. Here is what happened.

The next morning we sat down with the children and explained the new rules:

  • We are giving each of you €25 to spend on our vacation trip.
  • The €25 is entirely yours to spend however you like provided nothing is age inappropriate (e.g. no sharp knives).
  • Once the money is gone, there will absolutely, positively be no more money given.

Immediately after explaining rule #1, the oldest asked, “How much do shrimp cost?” Trying to hide our laughter, we then also had to add some additional guidance that all meals and desserts and activities would be provided at no cost to them. (This was vacation after all.)

(We know some people will argue that you should never give children money unless they earn it. Others will complain that €25 per kid was a ridiculously large amount of money to entrust to small children who could barely add things together. Still others will say that the amount was “unfair” because it was way too small relative to the large amount of money it costs to stay in a resort area for two weeks in the summer. So let us be clear: we are not holding this out as an example of the “right way” to teach kids about money. We are holding it out as an example of how kids respond.)

After this discussion, the very first thing the oldest child did was to march into a toy store, pick up some item and ask how much it cost. We cringed as we read the price tag aloud: €24. It seemed really poorly built and we were certain it would be discarded after a couple of days. Nonetheless, we needed to withstand by the rules we had established. If the kids wanted to buy it, then we would buy it. Upon hearing the price the oldest screamed out, “No way! We are not spending all my money on that!”

Suddenly there was a lot of comparison of prices between stores and comparison of features between items. The oldest child seemed to learn more arithmetic in those two weeks than at any other time in life. There was also a willingness to wait and see whether something better turned up tomorrow. All the mindless nagging about potentially buying every item in sight was gone and was replaced by a reasonably careful consideration of how to spend their money. But it was even better than that. The advice from the parents about purchases had previously been totally dismissed. But now we were suddenly sought out as consultants! “Do you think this will break easily?” “Could we get this cheaper somewhere else?” “Why is this model so much more expensive than the other?” “Would we be able to take this back if it did not work?”

All in all, it was an incredible turnaround of behaviour. So what changed? Two things changed: ownership and budgeting. First, ownership of the money themselves made them value it and respect it. Second, having a very simple, clearly defined budget made them take a integrated approach to spending it wisely.

By the end of the vacation, we were very proud of the way the kids handled their money. We even had them write down on a 3×5 card all the different things they were able to get for €25. You would be surprised how far €25 goes when you are so careful with it! On the last day, we also purchaseda secretly a couple of quality items from the toy store that the kids had admired, but could not afford with their money. How amused they were to unwrap these items at the next Christmas!

Our initial fears that the shopping district would ruin our vacation were solved. On the contrary, not only did we had a great vacation, but also the entire spending issue proved to be a great learning experience for both, the kids and the parents.

If a budget works this well for kids, think what it can do for adults.

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