We teach kids about money because we want them to grow up to be financially responsible, smart adults. Forbes points out there's another big benefit: keeping kids from getting spoiled.
Picture: Frank Boston (bostonsphotos)/Flickr
Author Ron Lieber tells Forbes that money can be used to teach every behaviour that is the opposite of spoiled — including generosity, curiosity, patience and perseverance. Among the several money lessons the article recommends, one includes drawing a fine line between wants and needs:
Lieber suggests creating a Want/Need continuum on paper using horizontal lines with Needs on the left and Wants on the right. For instance, he says, rain boots might be a need, but "the rubber doesn't get better when the price quadruples." So, he puts the $US25 boots under needs, but the $US100+ boots under wants. Then, for each one, draw a vertical line along that continuum. To the left of that line is what you're willing to pay for a child's need, and to the right is what you're not willing to pay.
In his family, Lieber is advocating for what he calls a "Lands' End Line," based on what he thinks the mid-priced but quality merchant would charge for an item. If his daughter wanted anything priced higher than the equivalent at Land's End, that would be a want, and she'd have to pay for the difference out of her own money.
The most important thing is to have these kinds of discussions where you're explaining that you don't want to pay over $X for one thing because you would rather spend that money on something else.
We've talked about playing the "wants vs needs" game before, but this goes even further by setting a spending limit to decide which column a potential purchase should go under.
The "hours-of-fun-per-dollar test" is also an interesting teaching tool.