My wife and I decided it was time to get our kids their own debit cards for Christmas this past year to begin teaching them about money. We are about 6 months into this new reality, and it has been interesting to see how each kid handles their money. It has also been interesting because I see them handle money in a way that I often see clients handle money as well.
Each kid gets an allowance if they do their basic chores around the house (laundry, cleaning rooms and bathrooms, etc.). If they do not do those basic chores, then they do not get their allowance. They can also earn more money for doing other jobs that help the household (dishes, scooping poop, vacuuming, etc.). Also, any cash or gift card money they want to add to their account we do that as well. Whenever they earn money a portion goes into savings, and the rest goes into their “spending” bucket. How each kid handles their spending money has been the most interesting to watch.
The Spender
Kid A spends their money just as quickly as they get it. Whether it is door dashing taco bell or ordering random stuff on Amazon, they find a way to spend that money shortly after it hits their account. They like having the freedom to buy whatever they want, whenever they want. If they would just ask, we would likely pay for some of the items they get, but they like to do it themselves.
I have seen this happen with clients as well, especially during their working years. They like to accumulate things and have no problem spending money while they are earning it. Where the challenge comes in with spenders is in retirement, where there are not unlimited resources.
The lesson here is to create a budget. Give yourself the freedom to still get the things you want but define what amounts you can spend on those things in any given week, month or year.
The Saver
Kid B is super aware of the balance in their account and is proud and excited to watch it grow. If they want something, they will come ask, and if we say, “You can get it, but you need to use your own money,” they tend to not buy whatever it is. They are generally very content with the things they already have and do not see a need to spend money just for the sake of spending money.
Again, I see this with clients often as well. Of course, as a financial advisor, I love to work with clients like this. They are generally very frugal and pride themselves on having a good amount of money set aside for whatever life might throw at them.
The lesson here is the opposite of the spender. Give yourself the freedom to spend money on things that make you happy. The discipline of saving money has given you the right to spend it.
The Giver
Kid C is like the saver. They do not spend very much money and are content, but I have seen them give money to others. When Kid A complains about not having much money, Kid C will either send them a few bucks or buy something for them. They have a generous spirit and seem to enjoy the act of giving.
A lot of clients tend to be givers as well. Whether it is helping their kids or grandkids financially or giving to local organizations, the act of giving is fairly common across all types of clients.
The lesson here is to encourage a generous, giving spirit but also keep in mind that you need to take care of yourself as well. Often, we see clients who give a lot to others, but it actually puts their personal financial wellbeing at stake. Having a good grasp on reality here is key.
At the end of the day, there are pros and cons to each of these approaches. Ideally, you have a little bit of each of these in your life. Do not be afraid to spend money wisely, always be saving for your future, and give to those people or places you are passionate about.