How to Teach Your Kids Financial Patience

Could you leave your young child alone in a room for a few minutes with a fluffy, sweet marshmallow…and trust him or her not to eat it until you get back? What if you promised a reward of a second marshmallow if your child waited? Could he or she do it?

Not entirely sure? You’re not alone. Self-control is a really tough task for kids—and most grownups, too, when sweets are involved!

The Famous Marshmallow Test

In the 1960s and ‘70s, a Stanford University researcher named Walter Mischel actually conducted a psychological experiment with kids and marshmallows (and some other treats). The Marshmallow Test became legendary. It’s been recreated and filmed many times. Mischel also recently released a book about his experiment and its implications.

The bottom line: Helping your child learn to “delay gratification” may be a key to helping them be financially successful. It may also help your kids in other parts of their lives—working to improve their grades, avoiding drugs, not overeating, etc.

Why the Wait?

Can your child give up something they really want right now in order to wait for something better down the road? For instance, can a young child skip buying candy today and save their money to buy an Xbox game in a month? Can teenagers occasionally skip having lattes with friends in order to save up for a car?

Financial experts like Beth Kobliner and Farnoosh Torabi and say absolutely yes. After all, when your kids are adults, the stakes will be higher. They may need to trade all sorts of day-to-day purchases so they can save for a vacation, house, retirement, etc.

4 Ways to Teach Kids to Wait

You can help teach kids financial patience—starting right now:

  • Offer a modest allowance. Even if you can afford more, pay your child just a little less. Make sure they’ll always have to save up for a few weeks, or even months, for bigger purchases.
  • Require waiting periods. Whenever your kids want to pay for an item or experience over $x (you set the limit)—even if they already have the money—make a rule that they have to wait. Have your child note the item on a family calendar and wait two weeks (or more for bigger buys). Hint: It also helps if you, the grownups, model this same behavior.
  • Have older kids pitch in. Don’t automatically pay in full for your teen’s school trip to Disney Land or that new phone. Let your teen earn some of the money with a job or extra assigned chores at home. You’ll automatically build in some waiting time as your child works and saves.
  • Be cautious about loans. Tempted to advance your child a few extra bucks when they’re short of money? Don’t do it. Let your kid save up or work more and wait. Particularly when kids are new to managing a bit of own money (even a small allowance), it’s good to set a family rule that you won’t loan money or pay allowances ahead of schedule.

Be clear that it’s not OK for your kids to borrow money from friends, either. You want your budding tycoons to realize that they should only buy things when they have enough of their own money in hand. Credit lessons can come later.

(photo courtesy © Ken Bosma cc2.0)

What your middle schooler should know about money

Going off to middle school is a big milestone — for your kids AND for you. No doubt, your kids will have more freedom. They may not need as much help with homework, and they may even ditch a few family movie nights to see their friends. 

But it’s a great time in their lives. They’re growing up, learning about themselves and starting to form their own opinions about the world. While they enjoy these new privileges, it’s still important to help them learn valuable life lessons — starting with money.

Opportunities to earn 

Middle school is a great age to start earning money [1]. How? Chores, babysitting, yard work, dog-walking, the list goes on. Get creative with it!

When your kids are earning money, they begin to understand what it means to spend it. They grasp the idea that money really doesn’t grow on trees — it comes from hard work. A great way to teach this is by giving them chores and allowance (you can find these in your Greenlight app!). 

Help them manage their spending

Middle schoolers are busier than ever before, and they’re enjoying their independence. When they head out to the movies or spend the night at a friend’s house, it’s important that you’re there with them… without physically being there. 

Greenlight lets you keep track of their spending habits directly from your phone. When they’re spending too much at a certain store, you can add spending controls. Or when they’re not saving enough, incentivize them with Parent-Paid Interest

Talk about saving vs. spending 

As your kids grow up, they may start to have more “wants.” Use this as a chance to talk about saving vs. spending. 

We recommend a “show, don’t tell” approach. Show them what happens when you save money over time. Nice car? Nest egg for college? Hoverboard? A healthy savings account will get them there! 

Understanding costs

When kids are young, they don’t always understand how much life costs. As you know, it can be… well, expensive. Not sure how to prepare them? Start here: 

  • The next time you’re grocery shopping, point out certain brands that are more expensive than others. See what they say! 
  • Tell them about variable expenses and fixed expenses [2]. For example, your car payment is a fixed expense — you know it’s the same every month, so you can budget around it. But a nice dinner out? That will vary depending on the restaurant, and we call that a variable expense. 
  • Show them the utility bill (fun, right?). Some people are shocked when they get their first utility bill. Do your kids a favor now and help them learn what drives the cost up or down — they’ll thank you later!

Keep the conversation going 

Your kids will still be under your roof for a while, so don’t let the conversation drop after middle school. Their understanding of money will evolve and so will your conversations. And when you hit a roadblock, you can always count on Greenlight to help you out!

[1] Money Talks News , [2] US News

What high school graduates should know about finances

You’ve made it to the finish line. After diplomas, passed tests and signed acceptance letters, it’s finally starting to feel real. 

If you’re scrambling at the last minute to send your kids off with all the knowledge and tips they need for the real world, take a breather. We have a step-by-step guide for raising financially-smart high school graduates.

The basics 

No matter what financial background they have or career path they choose, there are some basics that every high school senior should know before college. 

  • Credit vs. debit. Once they’re 18, they can get their own credit card. Here’s the thing: they have to be able to prove their independent income or have a co-signer (probably you!). Talk about credit vs. debit to decide if this is the right time for them. 
  • Everything costs money. Teach your kids how to budget and monitor their spending regularly so they don’t find themselves in a bad situation.
  • Wants vs. needs. For some kids, this is the first time they’ll be paying for gas on their own. For others, college loans are about to start piling up. Take this as a teaching moment to explain why needs should always come before wants.

Return on investment 

Whether they’re picking a major or starting their own business, an important lesson is return on investment. Start with something like, “What you do now affects what you do later. If you decide to push off your mandatory classes, you may wind up in college longer than you wanted to.” You can also use a calculator to figure out the ROI for a major or minor [1]. 

Keep communication open 

Just because they’re leaving home doesn’t mean they’re all alone — remind them of this. They have you and they have us. Setting the stage for strong communication is really important! 

Let Greenlight help 

Family finance, big decisions, money management… it’s kinda our thing. They may not be right down the hallway from you anymore, but you can use your app to stay connected and keep up the financial learnings. 

Or, send them a nice Greenlight Gift to let them know you’re thinking of them. With all of this help, they can handle anything that comes their way! 

[1] PayScale