How Parents Can Use Back-To-School Shopping As A Financial Lesson
Originally Published on Forbes.com
In the iconic eighties teen movie Ferris Bueller’s Day Off, Ferris points out that “Life moves pretty fast. If you don’t stop and look around, you could miss it.” While he was referencing skipping school, his quote could easily be about the opportunities we have in teaching our children key financial skills.
Over the next six weeks, 54 million school children will head back to school. In preparation for this rite of passage, American families will enter one of the biggest spending periods of the year. In fact, Deloitte’s 2018 Back to School Survey found that 29 million households will likely spend over $27.6 billion dollars on back-to-school items from clothing to supplies to electronics. This dollar amount breaks down to an average of $510 per child. No wonder this is an expensive and stressful time for many families.
While many parents will budget for these expenses, only a small percentage will actually use their back- to-school budget as an opportunity to teach their child about money. This isn’t a big surprise as recent Gallup polls have found that only one-third of all Americans maintain a household budget. This lack of financial structure ripples on the debt side of the balance sheet, as average household debt was $15,432 per NerdWallet’s 2017 Household Debt Study. Clearly our inability to live within a certain budget has long term ramifications.
In order to break this cycle, teaching our children how to budget should start at early age – and where better than their own back-to-school budget. “Talking about money with your kids can be tough, but children need to learn basic budgeting and the difference between wants and needs,” says Alan Althouse, CEO of TruWest Credit Union that services Arizona and Texas. “As a kid, it can be hard to understand that once your money runs out you can’t buy anything.”
Before you head to the stores, the first step should be helping your child understand the value of having a strategic plan to master their back-to-school budget. As Althouse notes, back-to-school budgets are a “fresh start to allow your child to focus on the end goal.”
It might seem premature to involve your child in the process of back-to-school spending, but recent studies have shown that by the age of five, many children have developed an emotional reaction to spending money. Learning the right parameters about spending might set your child up for more successful financial interactions later in life. Further, once your child has started to master the basic skills of addition and subtraction, it is easy to involve them in back to school planning.
Ann Watson, Vice President of People at Varo Money, concurs as she used back-to-school shopping with her second-grade son as a teachable moment. "I'll share with him his back-to-school clothing budget and then each time we get something, we'll subtract that from our budget. It helps him understand that you can’t just get everything you want – and have to do some planning."
Developing a sense of financial needs versus wants is a core component of the exercise; even more important is turning this exercise into a habit. A University College London study found that it takes approximately two months before a behavior becomes a habit. That is an important time frame when considering the back-to-school season.
The back-to-school shopping season runs from early as July to late September, easily providing sufficient time to create a habit. But the challenge is the season itself, as Deloitte found that 68% of all shoppers plan to complete their shopping within a one-month period. For the greatest impact, consider slowing down your back to school shopping so that your child can experience a repeatable process of budgeting.
“Solidify this by allowing your kids the freedom to make their own spending decisions,” advises Althouse. “Be prepared to have an open discussion after they’ve made their purchase and before their next trip to the store to ensure that they are learning this concept and are not spending in vain.”
Patience Has Its Rewards
Working with your child on their back-to-school budget raises a financial planning issue that many struggle with – not acting impulsively. In personal finance, patience is often rewarded. As the old saying goes, buy low and sell high.
In working with a back-to-school budget, having patience can allow the child to learn to wait for the right moment to spend versus save. The Deloitte study found that overall, those who waited until later in the season to shop, spent $100 less than early shoppers. For a child who is working through their budget, it’s powerful to learn that by waiting they might win.
A Repeatable Lesson
Creating a project around back-to-school shopping enables parents to teach a lesson that can become good, long-term habits – starting to save at an earlier age, distinguishing between wants and needs, and developing strong budget skills. Even if the child doesn’t succeed at first, back-to-school season is always right around the corner with another opportunity to get it right.