Let Your Kids Go Broke
By Alec Lindenauer, COR Chief Allowance Officer
My youngest daughter is flat-out broke right now. She can’t afford to buy a single thing for at least a few weeks. Did I mention I love it?
Too often in today’s world we see parents catering to their kids wants and desires a bit too easily. In the context of money, that means giving them too much money, and not enough struggle. And I don’t mean just top 1% type stuff here … I’m not wearing rose colored glasses here, saying too many parents are passing out Benjamins like M&Ms. On the contrary … I’m talking about letting your kid go broke from time to time, no matter how much money you’re currently giving them.
Why have them go broke? Because when they go broke, our kids can:
- Learn how crappy that experience feels, and seek to avoid it in the future
- Actually reflect on the money decisions they’ve made
- Consider new money decisions for the future
Case in point:
The other day I was on a plane with my soon-to-be eighth grader, when she said to me, “Daddy, over the summer I’m going to completely change the way I spend my money.”
This was completely unprompted, so of course I asked why. She said, “Because I’m broke. And I’ve been buying a bunch of make-up, and I feel like I’ve just been wasting money lately. I really want to save up for a few things that are more important. And also, I feel like I don’t have enough money to do the things I want for a while.”
I didn’t have to say a thing. My daughter is going to alter her spending habits not because I told her to, but because she felt the pain of being broke.
So, here’s how you can let your kid go broke this summer:
- Give your kids ownership and freedom.
Obvious point #1: Your kid can’t go broke if they don’t have money of their own. They have to feel ownership over money, in order to feel the pain of not having any. The best way to get them to feel that way is to give them the freedom to use it. So if they buy “another dumb stuffed animal,” well then get off their back, Jack. Just let them roll with it.
- Let your kid budget themself.
My kids get allowance monthly. They have to make their money last, and if they don’t … they go broke. If monthly doesn’t work for you, try every other week. But no matter what, resist the temptation to give them more money if they run out. By all means, consider paying for extra work or chores, but no freebie handouts.
- Only purchase needs, let them deal with wants.
Now that your kid has some money and freedom, just stick to buying them stuff they need. The stuff they want … That’s up to them. Yup, that means a serious dent in their Starbucks.
- If they go broke, ask this one question.
You can make this a great learning experience, but not by saying, “I told you so!” Instead, first try this: “I see you can’t do the thing you want to because you already spent your money for this week. Is there anything you would have done differently?” The self-reflective answer is what you’re going for. Talk that answer through, and see how things change next time around.
