Advice | For these parents, frugal habits start at home

“We’re not getting one of those,” he laughed, after seeing their reaction.

Wade and Alissa Pruett make it a point to have ongoing conversations about money with their children — something they started a few years ago by discussing the family budget.

Wade admits they didn’t think about budgeting until long after they had children. But once they understood the financial pressures of parenthood, “we felt it was really important to share that concept with them sooner rather than later,” he said.

The Washington Post spoke with the Pruetts, as well as two financial advisors, about effective lessons for teaching children the value of money.

Put the money in the bank, not your pocket

Like most parents, the Pruetts provide a weekly allowance for both children, with each receiving an amount equal to half their age. But instead of lending money, they put the money into a checking account, which has the effect of ensuring that it is not immediately spent. When kids don’t see the money, “it just piles up,” Alissa Pruett said.

They also allow their children to earn extra money by doing work beyond what is normally expected of them. For example, when their daughter was saving for something she had her eye on, she helped load the dishwasher for a few weeks to increase her earnings.

Recently, the Pruett family introduced the idea of ​​compound interest to their 11-year-old using an online calculator and numbers he could understand. They are planning to set up an interest bearing account for him and want to make sure he understands what interest can do over time.

“We ran the numbers and said if you have this much and contribute a hundred [dollars] every year until age 65, see how much you’ll have,” Alissa Pruett said. “That was an ‘aha’ moment for him.”

When asked how he would explain compound interest to someone just learning about it, Odin had a ready answer: “It’s when I put money in the bank and if I let it sit there and I don’t spend it, and I go on add it, then it will grow faster because it’s building on itself, like algae.”

When the kids got old enough to ask for more expensive gifts and toys — like when Odin asked for an Apple Watch — the Pruetts pulled out their budget spreadsheet, listing expenses in each category. They used it to introduce the concept of opportunity cost—that is, the trade-offs that come with every financial decision.

Wade explains that they simplified the idea for children this way: “If we buy that item that’s twice as much, we won’t be able to buy anything else.”

Now, when it comes to more expensive requests, the Pruetts suggest kids use their aid money. If the kids balk at that suggestion, Wade and Alissa tell them they don’t want to spend their money either. This puts the choice back on the children.

Make mistakes and learn from them

Sometimes after those conversations, their kids will go ahead with a purchase, like when Soren recently bought an expensive Lego set with her own money. She ended up regretting it because it didn’t live up to her expectations.

That was a useful lesson, Wade Pruett said.

“They must feel the pain [of remorse] to be processed”, he explained.

John Chesbrough, a financial advisor with TrailFP, has worked with the Pruetts and agrees that letting kids make mistakes with money — within reason — helps instill responsibility.

“If you’re going to teach people agency, you have to really give them the freedom to make mistakes and succeed,” he said.

Huyen Nguyen, a financial advisor at Inclusive Wealth, also emphasizes the value of mistakes. She recommends parents list what their best and worst financial decisions have ever been—and then ask themselves what drove those decisions so they can figure out what to pass on to their kids. theirs.

“She [understanding] it’s going to flow into how you can be in control of money — not letting money control you,” she said.

Set priorities and make decisions in real time

The Pruetts often use shopping and shopping to start spontaneous conversations about spending so their kids can learn to make quick decisions when they need to.

For example, at the local consignment shop where they drop off their clothes, the Pruetts make sure their kids see salespeople carefully selecting clothes suitable for resale, so they know the items on the shelves are in good condition while costing a fraction. new. clothes, Wade said.

Another savings trick their advisor, Chesbrough, recommends is a method he calls “keep the change.” If he gives his children money for a non-essential purchase, he hands over enough to cover the cost but tells them to keep the change. This forces his children to go shopping so they can collect any savings they can find.

“You’ll notice that their buying decisions just completely change,” Chesbrough said. “They don’t order drinks [at a restaurant]. They are happy with the water.”

Beyond the day-to-day, Nguyen suggests that parents help kids make a list of items they want to buy and number them in order of priority. Then, after waiting for some time, the children review the list to see if their wish list has changed. That way, they make the connection between how much money they have in the bank and how they can use it to make purchases that make sense in the longer term, she explained.

Looking at all these strategies, Alissa Pruett points out that she doesn’t want to introduce stress—it’s about making sure her kids are well-educated.

“Growing up we got a compensation, [but] we didn’t talk much about money”, she recalls. “I had no idea how much things cost.”