This does seem to be a common question adults ask themselves when making a purchase. However, is the question “to spend or not to spend” on your child’s mind? It should be! By instilling positive money habits and questions like this at a child’s young age, children are more likely to have a higher sense of self-esteem and, unsurprisingly, a higher chance of finding success. So how do you start to have these conversations? Let’s dive in! 

Set Goals 

When teaching your children whether to spend or not to spend, the first thing you should ask them is about their financial goals. What do they want to save for? An easy way to help break down their goals is by talking about short- and long-term goals. Maybe a long-term goal is to buy a bike someday. A short-term goal could be to save $10 from their allowance each month to add to their savings. The NuMoola app can help you and your child easily set up goals. 

Create a Budget 

Once goals have been established, the next thing you should talk about is how to create a budget. Work together with your child to create one. This will help them learn to spend with intention. Most of the time people believe that budgets take away their ability to spend. However, that is quite the opposite! Creating a budget gives people the freedom to spend! Children can live in the moment and spend money on something they would like and a budget can give them the freedom to do that. However, living in the moment comes with pros and cons. This is where opportunity cost comes in! 

Opportunity Cost 

According to Kiddle, opportunity cost is “the value of the next best thing you give up whenever you make a decision. It is ‘the loss of potential gain from other alternatives when one alternative is chosen’.” An example of opportunity cost you can share with them is, “If you buy this candy, then you won’t have money to buy the movie ticket.” Kids are able to start learning this concept in elementary school. Try giving your child the opportunity to make decisions when it comes to spending and have them identify the opportunity cost in the situation.  

Delayed Gratification 

Learning how to delay gratification and instead save money is one of the most important skills kids need to become financially secure adults. Working with them on setting goals, creating a budget, and understanding opportunity cost lays the groundwork for this. Often, when children think they want a toy, having them wait for a few weeks might be a good thing. You might after the wait that it not be as important to them anymore. This allows them to separate the instant gratification on larger purchases. There are many positive benefits when they successfully reach their goals. Encourage them to keep working towards the savings or giving goal they have created in NuMoola. 

Encouragement for You 

While children deal with this often, adults deal with this on a larger frequency. Research shows children as young as 3 years old can begin to understand basic money concepts and at age 7 to 9, money habits are set. Be a good example for your children when it comes to whether you should spend or not spend.  It’s never too late to start putting this into practice for you as well!