The money skill your kids need: Think before you spend

I always thought the foundation of smart money management was simply to spend less than you earn or have, but Karen Holland has opened my mind to reframing this idea. Through an organization called Gifting Sense, Ms. Holland has taken on the mission of teaching children to be smarter spenders.

Her take is that thinking before buying is an important step in finding money to save and invest. Here’s an e-mail Q&A that Ms. Holland did with me where she explains how mindful spending can be taught.

Q: Karen, can you start by telling us a bit about your background and how you came to start Gifting Sense?

A: I worked in banking for almost a decade before our (now-grown) family was born. Thanks to years of volunteering in schools and with organizations like Scouts, Girls on the Run and many youth sports teams, I realized that other families weren’t benefiting from the quick but effective, planned spending habits instilled in my sisters and I by our mother. It felt like ‘withholding’ not to share them. That’s how GiftingSense.org was born.

Q: I love how clear your mission statement is – teaching children how to think before they buy. Why did you choose to zero in on this aspect of money, rather than saving and investing?

A: I get asked this question often. The short answer is that we focus on spending because financial information needs to be relevant to be helpful, and spending is what most children do with the little money that comes their way. We want young people to experience first-hand how easy it is to get and use financial information to improve their lives while still in school. Why? Because our money personalities (the habits and beliefs we have about money) are incredibly stable and largely established by adolescence.

A longer answer is that thinking before buying is the first step to saving and then investing. As you yourself have said in this very column, investing is the most popular personal finance topic, but one has to be able to afford to invest. In other words, you need an investable surplus. Where do investable surpluses come from? In most cases, from spending less than you earn.

Q: What are the questions you want kids to ask before making a purchase?

A: We want young people to understand how much money and effort are required to execute a transaction, as well as how much they are likely to use and/or appreciate an item or experience before spending their money or anyone else’s. The questions we ask are straightforward and easy to answer. For example, how much do sales tax and delivery add to the cost of a (seemingly) small online purchase? Also, how much do safe transportation, snacks, and souvenirs add to the cost of going to a concert, pro sports event, or even an afternoon at the movies?

Q: How do you equip kids to deal with the FOMO factor in spending? I ask because kids put so much importance on how they’re seen by their peers.

A: We slow them down. Fear of missing out is the feeling that others are living a better life or have more information than you do. Young people are like everyone else – when they take two minutes to answer simple questions about a purchase right in front of them, they’re fully capable of realizing that the item or experience in question probably can’t be used or appreciated as much as they initially anticipated.

Q: Is social media the enemy of mindful spending, or can the two be reconciled?

A: Social media speeds up access to curated information, with an emphasis on curated. It also speeds up our ability to make a purchase. So, it really is the enemy of mindful spending. The videos/images regularly presented on Instagram, TikTok and the like typically only present the very best parts of life, the best possible outcomes, etc. This naturally invites an unfavourable comparison to our lives, where we experience all the messy, disappointing, unpredictable parts, not just the best ones. Add to this how easy social media makes it to spend (click here to buy now), and it’s not hard to see why young people can succumb to less than thoughtful spending.

That said, it’s not impossible for social media to be used to help young people make more thoughtful choices. How? We’re starting to see brave people share their frustrating experiences on social media and some ways to practice being financially responsible. So, today’s youth could get some genuinely helpful personal finance lessons from the platforms that, by and large, are primarily focused on spending.

Q: How much does the financial behaviour of parents influence kids in terms of their attitudes toward spending, buying, etc.?

A: A lot! Kids are sponges. If they grow up in a family that talked about money, planned their spending, and adjusted plans as real life got in the way, they’ll know how and why that works. Similarly, if money is never discussed, and all kids see are their parents using digital payment methods, it’s not hard to understand why those young people may not understand that money is scarce for many, finite for all, and therefore deserving of a plan. How else could our money personalities be established as early as age seven?

However, we also know that childhood financial legacy doesn’t have to be destiny. Wealth management professionals are increasingly focused on helping children who grow up with abundance manage their good fortune. Why? Because we know growing up with money doesn’t automatically mean you’ll develop the life skills required to live as a money-smart adult. The other side of that coin is that children who grow up living with scarcity can absolutely learn how to become money-smart adults.

Q: What feedback do students give you about your message of mindful spending?

A: First and foremost, students are pleasantly surprised to learn that thinking before buying does NOT mean that you never get to do or buy anything fun. That’s the biggest misconception out there – that being financially responsible means never having fun. I like to reiterate to school administrators and parents that we’re not in the “feel bad about spending” business, but rather the “think more about spending” business.

Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.

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