Recently I received a great email question from a father in Winnipeg, Canada. Justin W. has been teaching his son the “give, invest, save and spend” or GISS Method of Money Management to help him learn the different ways money can be used. Here is the challenge Justin is dealing with:
“My son is Brad is turning 8 in November and is increasingly aware of “things to buy”.
We are using the GISS method for financial literacy. One thing I have noticed lately, and this is the reason for my message, is that although Brad is very good at distributing his money into the different banks, I think his notion of Save and Spend are somewhat confused. We have made a list of some items he would like to save for. However, at times, when we are out, he will see something he wants and change his mind about what he is saving for…For him, getting something (often anything) is what he chooses over truly saving for something.
Any advice on this issue would be greatly appreciated.
Thanks in advance! Justin W.”
This is a great question and one many parents commonly face, I just dealt with this situation last spring when Max was seven.
First, we need to consider why it is so important for children to learn how to save their own money for something they desire. For example, my son really wanted a bunch of customized lego mini figures. The purpose is to help our children develop self-control through delayed gratification. Self-control impacts all areas of life, and the level of self-control in young children has been proven to be directly related to their financial security and success in adulthood. Another important reason to allow children to save for their own “wants” is that this how they begin to learn the value of things, they can’t understand something they have never experienced.
Here are a couple of tips that helped us address the save/spend confusion:
*To start out, make the situation easier and more enjoyable for everyone by ensuring your child is using a wishlist to help them prioritize their wants. This activity helps children learn to Wishlist make conscious choices rather than asking for everything they see, and helps parents shift the buying decision to the child. The child then gets to decide if they are committed enough to save for the item. This is a great approach to reduce stress for parents and encourages resourcefulness and entrepreneurial thinking in kids.
*Create a time period for which they are allowed to spend their saving money, perhaps once a month at Brad’s age of eight years old.
*Open a savings account with your child so they have a place to put the money from their savings box/jar at home. This will help demonstrate how important it is to save and create a barrier to spending – having to withdraw the money.
*To help ensure your child has carefully considered the desired item, request the item be printed on the wishlist before they are allowed to buy it. This prevents the challenging, and often emotional, outcomes of the “shopper’s high” J.W. mentioned. These occur when the child can’t find what they want. Their excitement and anxiety then lead them to want to “just buy anything” in order to fulfill their buying desire, and walk out with a bag in hand.
Boy shopping for toys
*Distraction sometimes works, going to another store, etc. A great old-fashioned idea is the “sleep on it” concept. It is tried and true for kids and adults because, by going home and taking time away from the item, you prevent those quick emotional in-store decisions.
Either way, it is likely Brad’s interest in toys is going to change every 3- 6 months at this age, so many of his toys will be “obsolete” and sitting untouched on the shelf sooner rather than later. If we can give children the opportunity to think through their buying decisions, the value and use of the item will generally be much higher than if we don’t. Most importantly, Brad will develop his real-life critical thinking skills and self-control, both of which will be extremely beneficial to his future success and happiness.
Thank you for the great question Justin and Happy Birthday to Brad!