Why Parents Should Let Their Kids Blow Money on Candy
We know it seems wrong, but don’t listen to us—science says it’s best.
Do you remember getting an allowance as a child and being torn between spending it on chocolate or saving it for a new game? Well, according to a new study, these types of hands-on experiences help us become better with money as adults.
What Is Financial Socialization?
Children learn about finances from their parents and guardians through a process called “financial socialization.” Historically, financial socialization has consisted of two parts: what parents teach their children and the example that parents play as role models. But a new study from a University of Arizona doctoral candidate suggests that previous research has overlooked a third component: giving children hands-on experience managing money.
The study, “Practice Makes Perfect: Experiential Learning as a Method of Financial Socialization,” explores why it’s important for parents to give children real-world experience with money management. Spoiler: it prepares children financially for adulthood.
How Can Parents Help Kids Practice with Money?
Sometimes it’s hard for parents to let their kids make mistakes. But those mistakes are crucial for future success—they teach lessons that might come at a greater cost down the road.
So how can reluctant parents do this? They should rely on a mix of modeling, explanation, and hands-on experience, the study’s author, Ashley LeBaron, told the University of Arizona newspaper.
For starters, consider implementing a regular allowance. According to LeBaron, the amount of money that parents provide their kids doesn’t matter—any amount that allows children to practice earning, spending, and saving will impart valuable skills.
But parents should provide instruction too, she said. So, set a good example of how to handle money. Have an open and honest conversation about money—why it’s important to save and how to spend within your means. Then, pay your children, either for tasks that go beyond their usual chores, as a reward for good grades, or as a special holiday treat.
Why Is Hands-On Experience with Money Important?
In LeBaron’s study, 115 participants were asked what their parents taught them about money and how those lessons were taught. Most participants recalled experiences with money in their youth, citing it as “extremely valuable” in preparing them to manage money independently. And those who didn’t have money experiences in childhood wish they had.
Based on the interviews, LeBaron and her team identified three themes: how to work hard for money, how to manage money, and how to spend money wisely. Why did parents say they gave their kids hands-on experience with money? Simple: to help them learn financial skills, acquire financial values, and become independent adults.
How do you give your kids hands-on experience with money? Let us know on Twitter at @OppUniversity!