Kids and Money: 10 Ways to Set a Good Spending Example

The holiday sales numbers are in. We busted our collective budget this season, and economists and policymakers could not be more pleased. But the Bank of Dad has some issues with this free spending, especially as it relates to the message we are sending our kids.

Let's start with the numbers. Spending in stores rose 5.5%; spending online jumped 15.4%. In all, we shelled out $584 billion the 50 days before Christmas. Incredibly, this is 3.1% more than we spent at the end of the last boom in 2007. Have we so quickly forgotten those heart-warming, recession-inspired lessons about thrift; about the greater value of intangibles like relationships, family and shared experiences?

Shopping was up on Black Friday, on Super Saturday, on Cyber Monday, on Christmas Eve. It was up on free-shipping days. It was up on smart phones and up on gift cards. And get this: shoppers were turning out in huge numbers between Christmas and New Year's Day too.

A lot of experts see these apparent good times as good news. It must mean the economy is roaring back. Go ahead and spend, we are told. It's the best way to get our economic engine humming again and is so critical to the recovery that it's practically our duty.

Nonsense. With unemployment near 10%, my guess is that this spending is mostly about pent-up demand and loading up credit cards that had been painstakingly paid down the last few years. There's nothing good or patriotic about spending money you don't have. Saving is the key to prosperity; it leads to investment, and that is where lasting recoveries are forged.

What kind of example are we setting for our kids? Please watch the less-than-a-minute video below. This is one of my favorites from a recent contest sponsored by Spendster.com and the National Endowment for Financial Education, which asked people to talk about the wasteful ways they spend money:

Cute, right? Yet you can't view that and not understand that your kids are watching and learning from your every move. If six months ago you were preaching the virtue of budgets and getting by on less, and then you spent double your plan on Christmas gifts, what do you think the kids will learn? Sure, they'll love the new drum set for Guitar Hero (or at least the box to play in) for a while. But what they will really take away is that buying more stuff is OK so long as there's room on the credit card.

Four in five kids say they learn their money habits from their parents. To set a good example:

• Don't spend money you don't have. Pretty basic.
• When you use your credit card in front of the kids, let them see you pay the bill too. That ties the behavior to the consequences.
• Always compare prices online or in the store before you buy but especially when the kids are watching. If you are price sensitive, they will be too.
• Put the kids on an allowance. If you refuse to bail them out they'll learn to budget for near and long-term goals without breaking a sweat.
• Talk about TV commercials that pitch items they want but do not need. Hint: most of it they'll never need.
• Shop with a list and do not stray. That's a great technique for showing how to avoid impulse purchases.
• Ask your kids to ask you why you made a purchase anytime they like. Ouch. That'll teach you to overspend.
• If going to the mall is considered a family outing, try going to the park or gym instead. That reinforces the notion of family first, and as a bonus you may drop a few pounds.
• Quit playing the lottery and put the money in a family get-away jar. The lottery is a little like smoking. The lottery won't kill you (though your spouse might!), but playing often may break you and once you've quit you'll be happy you did.
• Don't argue about money in front of the kids. That leaves the impression that material things are more important than family.

· Busting the Christmas Budget
· Kids and Credit Cards: 5 trends to Watch
· Top 5 Money Lessons for Kids
· How to Open a Roth IRA for Your Kids