Tight Holiday Budget? Teaching Children About Money

Setting a holiday budget can be quite a challenge, especially when money is tight enough the rest of the year. And just when you have laid it all out—cutting back on the cost of the traditional family feast with coupons and making the decision to drive to your parents instead of flying—one of your children approaches you with their wish list. Even if you have conquered the holiday budget as the money manager, explaining the limitations of money to your child may leave you at a loss.

Children are never too young to learn a little something about the value of a dollar. Rather than seeing the tension between your children’s want for presents and your current situation as a problem to be avoided, you can transform it into an opportunity to teach your kids about money. You will have to decide for yourself– based on the ages of your children and how you deal with finance– which lessons will work best for your family. Here are a few ideas on how to make the upcoming season more instructive.

Many parents believe the best way to teach kids how to handle money is to show them, in real life, how it works. You may want to take your kids along when you buy Christmas presents for their siblings or other relatives and explain how much you are spending. This may be a good time to show them how to set a budget and stay within its limits. Older children may understand this concept better if they are given a certain amount by you, or asked to use some of their saved up allowance earnings, to purchase their own presents for loved ones.

A really tight budget for you may mean asking your kids to pare down their Christmas list. If there is a particularly expensive item on the list you may want to let your child know receiving that present from you will be to the exclusion of other gifts. Some parents give their kids the opportunity to decide for themselves if they’d rather have one large present or several smaller ones. If you happen to be a family that lives sparsely throughout the year so you can spend a bit more freely at the holidays, find a way to explain this to your kids. Appreciating delayed gratification is a huge part of smart finances.

One of the best ways to put money in perspective is to remember all the things you can do without it, or with just a little bit. The holidays offer plenty of chances to do this. Making decorations with your kids, baking cookies and other treats together, and spending time as a family at home are all ways to enjoy the holidays without spending a ton of money.

Most parents agree that setting a good example is the best way to teach children, no matter what you want them to learn. By being smart with your own finances and teaching your kids about money when the opportunity arises, your holidays can be both fun and instructive—even on the tightest budget.