Help! I can't afford my child's wish list

The holidays are a great time to teach kids how not to overspend

Your Business Credit columnist Elaine Pofeldt
Elaine Pofeldt is a journalist whose articles on entrepreneurship and careers have appeared in Fortune, Working Mother, Money and many other publications. She is a former senior editor at Fortune Small Business magazine and an entrepreneur herself, as co-founder of 200kfreelancer.com, a website for independent professionals. She writes "Your Business Credit," a weekly column about small business and credit, for CreditCards.com.

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Question Dear Your Business Credit,
Now that my daughter is in the “tween” stage, I am finding she is more concerned about the brands she is wearing and keeping up with her friends at school than in the past.

She also is more interested in sophisticated items, such as the iPad, the latest iPhone and trending video games that can be very expensive. She also is involved in extracurricular activities (dance class and Girl Scouts). Her interests and activities have taken a toll on my wallet.

When I tell my daughter that we can’t afford a certain item, have to wait to make a purchase or can’t afford to take on a particular activity at this time, she doesn’t seem to understand, since her friends seem to have it all.

Although we have everything we need, I run a small business and need to have enough cash and credit available to pay the bills in case my sales slow down or a client pays me late.

How can I get my daughter to understand the true value of a dollar and that my husband and I have a budget that we need to stick to in order to keep us out of debt? – Concerned Mom

Answer Dear Concerned Mom,
Many parents feel pressured to buy things they can’t afford for kids who don’t understand how hard it is to make ends meet today. That pressure can be intense around the holidays.

Fortunately, the conversations you are having with your daughter about the things she wants you to buy are a great opportunity to help her develop good habits for handling money.

Keeping a budget and firmly sticking to it, as you are doing, is a great place to start teaching your daughter the importance of financial discipline. If you emphasize that a budget is a spending plan that will help you direct your cash to the things you most enjoy spending it on, it will help her develop a positive relationship with money.

Leslie Tayne, an attorney who advises small-business owners on credit and debt and the author of “Life & Debt,” shared several other suggestions for finding teachable moments in the holiday shopping season. 

First, include your daughter in your holiday shopping trips. Share the gift list you’ve created and the amount you’ve budgeted for each purchase. “It is important to explain to children how much items cost,” Tayne said in an email.

Make a conscious decision about how you will pay for holiday purchases ahead of time and explain the reasons, Tayne said. For instance, you might explain that using a debit card is a good way to avoid fees and interest and avoid running up debt. If you’ve opted to use a credit card so you can earn rewards points, mention why you’re doing that, she added.

“Discuss your reasoning with your child so your child sees that you have responsibly considered your payment options and have a logical reason behind the payment method you have chosen,” Tayne suggests.

Regardless of how you pay for your purchases, stick with your budget – and explain how happy it makes you to be in control of your finances – instead of giving in to the temptation to overspend.

“If your child sees you continuing to do this with all of your shopping, then your child is more likely to adopt this approach when shopping as he/she gets older,” Tayne said.

Meanwhile, you’ll be able to start the New Year on the right financial footing.

 See related: 4 wrong money messages for kids (and 4 right ones), It's the thought that counts: Americans plan holiday gift thrift

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Updated: 11-16-2018