A blog written with parents in mind
Parents Stretching Financially For Kids Nonessentials
It's natural for parents to want to provide as much for their children as possible, and it's also easy for the costs associated with buying your kids things to quickly become overwhelming.
We know it is important to talk to kids about money, but what else can you do to help them learn and understand important financial concepts? It turns out you don’t have to go far to find an effective tool to raise money savvy kids. T. Rowe Price’s 2015 Parents, Kids & Money Survey revealed that there is significant benefit in letting kids experience money through an allowance or another way kids can manage money on their own.
Our survey found that kids who get an allowance or have parents who let them make mistakes with money are more likely to say they feel knowledgeable about managing personal finances and are more likely to say that their parents are doing a good job teaching them about money.
What’s important for parents is making sure they turn these money experiences into talking opportunities because we know that conversations work. In fact, parents who frequently talk to their kids about money are more than three times as likely to have kids who feel they are smart about personal finances. Parents can invest in their kids’ futures by talking to them about money matters weekly.
And when parents combine both tactics—talking to kids and letting them experience money—two-thirds of those kids feel knowledgeable compared with only 2% of kids whose parents do neither.
There are many ways to provide these experiences, and an allowance is only one. Other ways could be opening up savings accounts for your children or simply giving them a limited amount of money in their favorite toy store and having them make trade-off decisions on how to spend it. And some parents let their kids use credit cards, with some guardrails.
Without providing opportunities for kids to experience money, it’s like telling them how to play the piano without letting them touch one and expecting that they'll be able to play a sonata. Conversations can guide experience, and experience can put those conversations into practice. Parents who combine these tactics are on the right track to raising money confident kids.