Color of Money: Allowing children financial freedom can pay off
WASHINGTON -- I've always struggled with how much financial freedom to give my children.
I'm a life-long penny-pincher, and I wanted my children to embrace frugality, too. So I forbade certain spending. I didn't want them to grow up being spendthrifts.
But, as I've matured and gotten better at parenting, I've realized that sometimes I have to let my children make financial decisions that won't be wise.
Even writing that makes me grimace.
When it comes to their money, should parents let their children learn from their own mistakes?
For the longest time, back-to-school shopping for my three children created a lot of stress for them and for me. I wanted to spend as little money as possible, and my children, mostly the two girls, wanted to fit in with their friends. They begged for more trendy -- i.e. expensive -- clothes. My son didn't care what I bought.
Then one year my husband and I decided to give the children a set amount of money for school shopping. We'd give them the cash, and they could buy whatever they needed for school within that budgeted amount. So if my daughter wanted an expensive pair of jeans that would consume the majority of her allotment, that meant fewer clothes in her wardrobe.
It worked. When they were spending our money, they didn't pay attention to what stuff costs. They were all too busy complaining about how cheap we were and whining about where we were taking them to shop -- discount stores.
But when it was their money, all of a sudden it was, "I can't afford that."
For several years, T. Rowe Price has been examining the attitudes parents and their children have about money. The 2017 national survey of 1,014 parents with children ages 8 to 14, as well as the kids themselves, had two findings that are key to teaching your children about money: (1) Children have better financial habits when parents let them decide how to save and spend their own money; and (2) children learn to be good money managers by modeling what their parents do.