What holiday shopping can teach kids about personal finance

During the holiday season, spending tends to rise as people participate in the traditions of gift-giving and celebrating with family and friends. For parents, holiday shopping also brings an opportunity to teach their children valuable life lessons about personal finance. 

As many parents know, kids don’t usually have a natural understanding of money or realistic holiday expectations on their own. By engaging in age-appropriate conversations and illustrating financial concepts using real-life examples, families can instill the knowledge and skills their children need to manage money responsibly as they grow up, with plenty of joy along the way. 

As a mom of three and the director of education at Greenlight, I love helping parents find daily opportunities to teach their kids about money. Here are three lessons for this holiday season, with tips for practice at home.

Prioritize budgeting

Money is not unlimited! Choices are necessary when making a plan for spending and saving. Even young children can learn that a budget is simply a plan for money. 

Gifts may comprise most of a holiday budget, but there are other expenses, too, like decorations, food, entertainment, travel and other seasonal items or experiences. If you decide to spend in one area, you’re deciding not to spend in another—and those are called trade-offs. 

Explain how you prioritize your spending preferences, which may change as kids get older. If they’ve outgrown an old tradition, consider a new way to use the money instead. 

Encourage them to give their own gifts 

When my kids were young, we gave them a set amount of money to buy gifts for their teachers and each other. After my daughter became a teenager, she began using her own money, and felt more holiday spirit because she did it independently. Gift budgets don’t have to be large to be meaningful. Whether your kids earn the money with chores or you provide a small budget, they’re learning the meaning of giving and the value of a dollar.

Put them in charge of a holiday experience

Challenge your kids to plan something for the family, whether it’s a meal, movie night, fun activity, or an annual tradition. Provide a budget and encourage them to think through all the costs—even if they’re minimal. It gives them hands-on learning about planning and decision-making.

Consider giving back to your community

Many families donate to charities or volunteer around the holidays, which is a great opportunity to teach your kids about giving back. When my sons were in elementary school, they hosted a hot chocolate stand in our neighborhood once a year and donated their earnings. Since then, they’ve worked on food drives and helped deliver meals. This year, they provided coats and shoes to those in need. Both time and money can be used to help others.

Spend wisely to maximize money

Once money is spent, it’s gone. No one wants to regret a purchase or waste money—and smart shopping helps avoid that.

This also matters a lot when kids build their wish lists. Parents can help kids focus on the “wants” they’ll enjoy and use the most. Whether a wishlist item is expensive or not, it should be a good value for the cost. 

Encourage them to express gratitude and find contentment with what they already have. Families may also choose to include “needs” on wishlists.

Make money transactions safely

Help your kids get practical shopping experience. Whether using cash or electronic payments, you can teach them more than just how to verify their change or swipe a card. Talk about how to avoid theft with safe practices in-store and online, such as protecting PIN numbers and personal information. You can also discuss how to avoid surprises by understanding the basics of sales tax and shipping costs. 

Do some comparison shopping

One way to save money? Never overpay. Teach kids to be savvy shoppers by comparing prices for similar products at different stores. My youngest son was recently shopping for a computer keyboard and was so surprised to find the one he wanted for almost half the price at a highly rated seller—and he happily kept the $20 difference he saved. Always look for discounts and sales to help them stay within budget.

Conduct research on bigger-ticket items

It’s important to have accurate product information from reliable sources before you buy—especially for more expensive items like phones or electronics. Show your kids how to read reviews and verify product details to ensure quality. For pricey brands, you should watch out for fakes by using a trusted provider.

Save now to spend later

To spend money in the future, you need to save it today. Start educating your kids when they’re young on what it means to live within your means and avoid overspending. Older kids can understand that using credit to buy things you can’t afford has the additional cost of interest. Understanding the ramifications of debt on long-term financial goals is critical.

Explain that any planned spending should have a savings goal. Teach them about S.M.A.R.T. goals so they understand how to make them specific, measurable, achievable, relevant, and time-bound—and successful!

Reflect on the past year  

Have a “Year in Review” money discussion with your family. Check on the progress of ongoing saving goals or celebrate what your kids learned about money. You can also review spending, such as major expenses or recurring purchases that add up throughout the year. If there are any surprises, consider what you may want to change to save more in the future. 

Focus on short-term goals in the year ahead  

Brainstorm a few money goals that your kids or teens can set for the upcoming year, whether it’s a goal they’ll contribute to themselves from an allowance or one they’ll track with you. Remind kids that they’re one step closer to achieving their goal every time they stick with the plan and make saving a habit.

Consider longer-term goals with investing  

Discuss saving for bigger goals and introduce investing, highlighting the role it can play in their long-term financial success. Helping them think about the future and prioritize it contributes to a mindset of financial responsibility, which is a lasting gift to give.

While every season is a great one to teach your kids about money, the holidays are filled with extra opportunities to instill smart financial habits and have money conversations with your family. ‘Tis the season!