Teaching Kids to Be Smart Shoppers

Spending is a significant part of money management, so it makes sense to try to help kids figure out the best ways to use their money.

The fact that nobody taught most of us about becoming smart shopper is evident in the way we abuse credit. More than half of North America’s credit-card holders have balances owing, paying what can be exorbitant interest rates on products and services that may not even outlive their repayment schedules.

Have you had a look at how long it’ll take to get your credit card balance paid off if you pay only the minimum balance each month? Shocking! And yet so many people fall into the minimum payment trap.

While our values are very different from our parents’ who typically spent only what they had, our “spend-i-tis” is in large part because the money game has changed. Credit cards and lines of credit are relatively new ways of paying for the stuff we need and want. And the statistics on credit balances are staggering. The average level of personal debt in Canada rose 21% in 2013 to $15,910. But that’s the “average.” I don’t have any debt so someone else has mine to add to their pile.

Whether we are aware of it or not, we already play a huge role in teaching our kids how to shop. Each time hit a store we model what a consumer looks like. And whether our model is positive or not our kids are learning.

Teaching our children about becoming smart shoppers means looking closely at how we shop. It also means taking an active role in explaining what we are doing and why. And one of the most effective tools for helping kids understand what a product or service is really worth is the concept of “relative value.”

Relative value refers to the relationship between what an item costs and how many hours you have to work to pay for it. But it’s not as simple as saying that if it costs $140 for a concert ticket and you earn $10 an hour, you would have to work for two days to bring home enough money to afford that concert ticket. There are taxes to be paid, rent or mortgage costs to be covered, food to buy and transportation to cover. Since your essential expenses come first – those are our needs – we have to cover those costs before we can spend our hard earned money on “wants.” That puts a whole new spin on the real cost of that ticket, doesn’t it?

Since it’s your job to make sure you’re raising money-smart kids – have you noticed no one else is volunteering to do this job — you have to look for ways to introduce the idea of relative value. And if your kiddo is spending YOUR hard-earned money, it’s time to share your financial reality with your Mini-me. Hang on now, don’t go screaming from the room. What are you afraid of? If you aren’t prepared to share your own financial circumstances with your child, why should he listen to your money advice?

Tell Little Miss how much money you make per hour; if you aren’t paid by the hour, work it out. Deduct your total expenses (including income tax, shelter, transportation, savings and other essential expenses) from this hourly wage to show your remaining disposable income per hour.

Now it’s time to go shopping. Ask her to write down the price of that new whatever-it-is-she-wants. Divide the price by the hourly disposable income amount to show how many hours you would have to work to buy the item. Ask your child if she would be prepared to work that many hours for that specific item. If she chose a less expensive version, how many hours would you have to work? Is that item more or less important than some other thing your family wants to buy?

Once your child has a job, talk about relative value in terms of how many papers have to be delivered, how many lawns have to be cut, or how many hours he must shelving boxes (or whatever else he does to earn money) relative to the cost of an item. Remember to subtract the money he would have to pay for taxes, his cell phone bill and savings, along with whatever other costs he’s covering from his job, so he knows his real disposable income per hour.

Resist the urge to make every purchase into a lesson. Opportunities will naturally arise when you can reinforce the concept. Teaching relative value shouldn’t be arduous. Don’t lecture. Teach.



8 Responses to “Teaching Kids to Be Smart Shoppers”

  1. Great message Gail! I tried to teach my kids exactly that though my 20 year old princess’s behavior is very concerning to me. She returned from Australia trip in April 2015 and has made 30k cobbled together from two part time on call jobs, she also had 7k in savings when she returned from her 3 month trip. Today she has nothing in her accounts, she refuses to save a penny. She pays me 500 rent a month and I pay for her groceries etc, every month she pays off her credit card to tune of $600+ a month and her cell phone bill and spends all her money on food and entertainment. She spends and spends and spends it drives me bonkers. I have tried talking to her and she cries, I now say nothing. She has a 1200 tax bill due, car payment of 843 every three months and she refuses even to save 50$ a month. She keeps threatening to move out which I dearly wish she would do, but has no money for damage deposit or first month rent. I have tried to base her rent on 35% of her take home pay and she just doesn’t give a hoot. More clothes concerts booze partying, what more can I do? She already knows I won’t help her out of any financial bind. I did offer to contribute dollar for dollar any monies for a downpayment towards a house/condo and she just blew through her savings, my son he is a squirrel, saving his money while balancing his entertainment needs and has himself on a strict cash diet of $80 a week to include gas for his vehicle. It is like watching a train wreck in slow motion. Any ideas on what to do with my girl? Thank you!!!

  2. I would keep on trying to talk, even if she cries. 20 yr olds don’t get to cry as an out. Can you find examples of rent she’d be paying in your town? And then let her know that her “rent” will be going up some percentage as don’t think $500 would cover what is available.
    Let her know that living with you is not a forever proposition. Now she is an adult, so living with you in future would be as room-mates, covering half (or whatever her share is in your family) of ALL costs of shelter, utilities, taxes and groceries. Give her 3-6 month window (or by some age, eg 21) to plan for the change-over: either staying as roomie or finding her own place (so has time to save for damage deposit and first month’s rent).
    Or could offer some rent reduction if proves has saved certain amount monthly.

  3. Great post Gail! I’ve said this before, but when I was in Gr. 5 (many moons ago), one of our class lessons was to make a budget and use grocery fliers to plan food spending, etc. and track our budgets for a week. We researched jobs and how much they were, utilities, the cost of a house, etc. It was an eye opener. Soon after that project, I got my first bank account and when I started my first job, that was when I started my first RRSP (going to be 50 this year, so the money has been there for awhile).
    My two daughters both have allowances and are told if they “want” something, to save up for it. Both have been doing great – youngest is saving for a laptop and we are going this week to purchase one – she has enough money already. They get it – and my husband and I don’t hold back on how much stuff costs (our mortgage, food, utilities, everything). I want them to realize that you don’t have to have all the stuff to live a good life. Hopefully, our lessons will prove good to them once they start out on their own. Thanks for all the help along the way, Gail!

  4. Tracy, I have a 19 yr old sister and her boyfriend living in my basement suite. Right now they only pay $400 per month and no utilities – BUT: they have to pay for their own food, they have to buy and cook their own food, they have to do their own laundry, look after their own pets, keep their home clean, and are responsible for mowing the lawn and chopping all the wood for their wood stove. Believe me, there is huge savings when they buy their own food, but most importantly, they are doing all the things that real adults have to do to maintain a rental home. Three months after little sis turns 20, I am going to up the rent to $800 – almost, but not quite market price – but mostly this is because little sis hasn’t worked very hard to find a job, so it’s time to turn up the heat a little bit.

  5. This is a great idea for children to truly understand the idea of how much work it would take to earn the item they want. I fell like this will totally grow them up to be hard workers, as many kids will have no problem trying to prove to the parents how hard they are willing to work to get what they want. Thanks for sharing this idea!

  6. It is defiantely such a sour subject to talk to my kids about money. Every time they come home from school they say they want one thing or another. They really don’t understand how hard to earn each dollar in our world

  7. OMG… I spend soooo much money for Christmas on gifts it is obscene. I really need to do something about next year. I can probably have already retired if i didn’t buy gifts for all the kids in my family…

  8. avatar Brittany Says:
    May 9, 2017 at 2:18 am

    @Tracy I know this post is older, but I feel for your daughter. If your situation is still the same, all you can do is find a way to bring a third-party to the table for her.

    The reality is that at twenty years old (and having made good financial decisions before), she feels like she is a grown adult and is more than capable of making her own choices, and that for better or for worse they are hers. You’ve become her nagging mother, and she’s “learned” by now that she doesn’t need your approval for her decisions.

    At this point it’s too late for much that you could incorporate to help her. She needs a third-party source that hasn’t been around her, and isn’t looking to take back the role of parent to her.

    *** Ex-almost princess. I was 21 when I finally smartened up, and it was because I was bored at home during the day, none of my usual shows were on, and as I was flicking past channels I saw this debt show. It was entertaining, seemed boring, but then the host’s tone of voice caught my attention. It became a daily ritual to watch these people apparently have their problems solved, and to laugh because those problems couldn’t possibly be similar to mine. And then I discovered Princess, boy was I blushing. The first exercise I ever did was the general 25/15/35/15/10 budget, totally changed my perspective.

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