Let Your Child Participate in Expenses

We received a great question from a parent who was reflecting on their family:

How do we keep our family's wealth from sapping our children of initiative?

We recognize that this question could be classified as a "first world problem," but the concept of building initiative is not limited to wealthy families. In fact, one could make the case that this common parental desire to build work ethic (and initiative) is wealth-agnostic.

In this article, we'll highlight three big-picture strategies to keep in mind for cultivating initiative when it comes to finances.

1. Talk about finances early and often

Talking about finances doesn't always have to be a formal sit-down conversation with your child. Sometimes it's more effective when it's naturally brought up in conversation or as an "Oh, by the way..." during a chat with your kids.

If you're not sure how to seamlessly work finances into the conversation, stories and anecdotes always seem to do the trick. For example, you might start with, "Did I ever tell you guys the story about when I wanted [insert item] and when I went to ask Grandpa for money for it, he said no?" Not only are stories engaging for your kids, but research shows that they are an effective tool for learning.

If it still seems clunky and out of reach, check out these resources and tools for getting the conversation about finances started.

2. Inspire your kids to participate with the spending they do on "wants"

Kids tend to appreciate things that they themselves create. (Ever heard of the IKEA effect?) So let them be a creator in the financial solutions towards paying for something they want. When they come to you asking for something they want, use it as a learning opportunity for them to participate in the expense.

For example, you may choose to cover part of the cost of a new toy or game, but then your child must contribute the remaining funds. If the item your child wants is something you're ok with them having, you might decide to cover 50%. Things that you don't approve of or feel are wasteful spending you can let them have if they earn 100% of the money to buy it themselves.

Even if your child only contributes 10% towards the purchase of something they want, it still helps them build an appreciation for the value of items and develop an initiative to make money to contribute to costs. It's not about the money, it's about the mindset.

3. Just say "No"

It's ok to say "no" to your kids when they ask you to buy something for them, and it's important to do so when 1) What they're asking for is non-essential and 2) The cost for that thing is out of your budget. Sometimes parents avoid being honest with their kids when budgets are tight because they're afraid of appearing as failures to their children. This type of transparency, however, builds trust and understanding within your family and can also inspire your kids to take initiative towards covering costs for their personal wants.

The key here is to say "no" in a constructive, effective manner.

If you go with, "That would be a stupid thing to spend money on and you'll never see a dime from me to let you get something like that," you can bet the conversation is not going to go well. The lesson you're hoping your kids receive during these coachable moments will get lost in defensive emotions - both yours and theirs.

Instead, if you feel a knee jerk reaction to respond in this manner when your kids ask you to buy something, take a deep breath and try something more like this:

"I know that there are things in life that we all want. I try to stay disciplined in my decision-making on what to, and not to, spend money on. Right now, I don't feel comfortable spending money on that item. However, if it is super important to you, maybe we can brainstorm ways for you to earn the money to be able to make the purchase."

Instead of giving your child the sense that you don't care about their wants and isolating them with your language, you convey to them the importance of wise decision-making skills and let them know you're there to support their initiative to purchase something they want. You build a bridge instead of a wall.

With these three approaches, you are ensuring that your kids are participating in the spending process while also inspiring them to take initiative. This gives them a better understanding of how much things cost, promotes them to take ownership for getting the things they want, and provides them with the gratitude for whatever it was they are buying since they were responsible for making it happen.

Give it a try and see what benefits occur!