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Teaching Kids About What Things Cost

Kids have no idea what things cost. When they're very young, there's no difference to them between the cost of a candy bar and the cost of a video game. To take things one step further, there's no difference to them between a low-priced video game and a high-priced one. Price is meaningless to them.

Older kids may know what things cost, but they may have little idea about whether they're getting value for their money. They may know that a pair of sneakers costs $100, but are they worth the money?

That's why it's important to help your child understand what things cost and whether there's value in that cost. There are several ways you can do this.

Money ABCs

You can tell your child that a sale is a mark-down of the price of an item. The sale price can be expressed as a dollar amount—the sweater that originally cost $40 is on sale for $34. Or, the sale could be expressed a percentage off the original price—20 percent off.

  • Give your child an allowance. Nothing teaches kids quicker about what things cost than by giving them their own money to spend. This decision-making freedom allows them to get the feel of prices. Allowances are discussed in How Much Allowance to Give.
  • Shop and talk. When you're out shopping with your child, show him price tags. Point out when things are costly or not. In KayBees, I overheard a parent telling a young child that a particular game cost only $8. The parent said, “This is a good buy.” Explain about discounts and sales.
  • Let your child read up on things. Zillions, the Consumer Reports magazine for children, can help kids become smart consumers. This magazine helps them see through ad hype and make informed decisions.
  • Get schools to educate kids about commercialism and ad propaganda. The Consumers Union, a nonprofit organization that publishes Consumer Reports, advocates making schools ad-free zones and taking other initiatives to education our children.

Necessities Versus Luxuries

As a parent, you know that the weekly grocery bills are necessities, while dinner out on a Saturday night can be classified as a luxury (even though you may feel like you need it). This distinction between what you can't go without and what is only icing on the cake is something that you've learned.

But your child may think that getting a new wardrobe every season is essential. This thinking isn't confined to your elementary school child, either: Your teenager may still harbor this belief. In her mind, getting the wardrobe may help her social standing with her peers, but you know that it isn't a necessity. Having a pair a shoes that fits and a warm winter coat are necessities.

Understanding this distinction while kids are young will help them make good decisions on how to spend their money when they're older.

Help your child to learn the difference between what he needs and what he might want or wish for by letting him make a list. In the first column, have him list the things he requires; in the next column, have him write down all the things he may desire. (Some hints on necessities in addition to rent, food, heat, and telephone include school, doctor's visits, medicines, and clothing.)

Necessities Luxuries
______________________________ ______________________________
______________________________ ______________________________
______________________________ ______________________________
______________________________ ______________________________
______________________________ ______________________________
______________________________ ______________________________
______________________________ ______________________________
______________________________ ______________________________
______________________________ ______________________________

As your child will see after completing the list, many things must be paid for first before the extras can be considered. You also should review his list and help him reassign certain items from necessity to luxury. Explain that no matter how important that video game may seem to him, it's not a necessity!

As children get older and can distinguish between necessities and luxuries, the next step is learning about value for one's money.

Piggybank on It

Learning to make lists is a habit that can serve your child throughout his life. He'll get used to thinking ahead—not only about how he spends his money, but also about how he spends his time.

Planning Purchases Versus Impulse Buying

It has been estimated that as much as 20 percent or more of our money is wasted because we make unplanned purchases without regard to the value of what we're buying or whether we really need it. Unless you show your children how to plan for purchases, they also will become impulse buyers and waste their money.

On your next shopping excursion with your child to the supermarket, the drug store, or the mall, make a shopping list. These are the things you've planned for.

While shopping, check the list to make sure that you've bought what you planned to. You don't want to overlook anything, but at the same time, you want to avoid purchasing luxuries that you didn't intend to.

When you come home, check your packages. Compare what's in them to what was on your list. Were there things in your packages that you didn't planned for? If you went overboard this time, make sure that you're more careful on your next shopping excursion.

Your child can make her own shopping list for the things she needs to get (even if you're paying for the things on the list). Let her make a shopping list when you're out together looking for school supplies on opening school day, or when you're hunting for school clothes or Christmas presents.

More on: Money and Kids

Excerpted from The Complete Idiot's Guide to Money-Smart Kids © 1999 by Barbara Weltman. All rights reserved including the right of reproduction in whole or in part in any form. Used by arrangement with Alpha Books, a member of Penguin Group (USA) Inc.

To order this book visit Amazon's web site or call 1-800-253-6476.


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