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Kids and Money: What To Do With Christmas Cash

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CashEach year, my son receives some cash as part of Christmas. This is always exciting for him because it means extra money on top of his regularly scheduled allowance. It’s an extra boost. And, since we don’t let him buy anything with his (November) birthday money until after Christmas, the Christmas cash means adds to an already-growing stash. He feels positively flush right after Christmas.

But is it a good idea to let him just blow his Christmas cash on whatever he wants once January rolls around? As always, the receipt of Christmas cash provides an opportunity to reinforce money lessons that we want our son to learn.

Christmas Cash is Treated Like Other Income

The first thing we do is make sure that he understands that Christmas cash is treated like any other income. As adults, when we receive money gifts from others, we contribute to our church, and we set money aside for savings. We set the example, and we expect our son to follow our lead.

We explain that even though the Christmas cash is a gift, it still needs to be treated like any other income he receives, whether it’s from allowance, 4-H ribbon money or odd jobs around the neighborhood. And that means he pays tithing and sets some of it aside for his long-term savings.

Recognizing that this type of windfall should be treated like other income is important. It continues to help your kids develop habits that, hopefully, will continue with them as they age.

Keep Spending in Check

Once the preliminaries are taken care of, my son immediately wants to spend his money. Studies show that people are more willing to spend money on pay day, when they have a new addition to the bank account, and children aren’t any different. Just looking at that pile of cash encourages them to spend.

Try to rein in that initial feeling of wanting to spend. Talk about what your child wants to buy, and why. If your child had a previous spending goal, that hasn’t been reached yet, ask if he or she has changed her mind. Just reminding my son how close his Christmas cash got him to reaching the amount he needed for a specific toy cooled his interest in spending on the latest thing to catch his fancy.

Sometimes, all your child needs is a reminder that he or she has other goals and interests. If your child decides, though, to spend the money anyway help him or her do it as wisely as possible. Insist that you comparison-shop to find the best prices first. And, don’t be afraid to let your child make a money mistake that will be regretted later. The fact that my son has spent money on things he didn’t really want in the past has helped avoid the same fate recently — as long as we provide gentle reminders on occasion.

We do, though, prevent him from spending everything he has. Just a few days ago, I showed my son my bank balance online. “It’s the end of the month. Did I spend everything in there? What happens if you end up needing the money for something else?” He thought for a moment. “I want to be ready,” he replied.

How do you handle Christmas money gifts your children receive?

(Photo: bfishadow)

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7 Responses to “Kids and Money: What To Do With Christmas Cash”

  1. 50-50. Half in the bank, half in the wallet to spend. I’d love to put all of it in the bank, but we also want to teach the kids how to spend wisely, and taking away all the money wouldn’t achieve that goal. Fortunately they’ve learned to hold on to their 50 for something they really want.

  2. fabclimbers says:

    Totally disagree this time. Usually Christmas cash is in lieu of a gift and also because the giver doesn’t know what to give as a gift. Especially true for teens at times when they need or want expensive items that a single gift of cash can’t cover. The giver should receive a thank you note explaining how the cash was used.

    Of course I’m not addressing large cash gifts $250.00 or more. That certainly falls more within the guidelines of this article.

    • Shirley says:

      I agree that cash in lieu of a gift is the gift itself. Once a child has reached their teens, they should already have some financial lessons in place. The gift is for them to decide what to do with.

      The thank-you note, email or phone call is a must!

    • Scott says:

      So you think that because someone gave you money as a gift that you are obligated to go spend it on something material? This is part of the American problem right now.

      The gift of savings is still a gift and you can state that the money was put into a savings account for a future need in the thank you note. If the people giving the money get offended that the child saved the money instead of spending it, then that is THEIR problem as an over-expectant gift-giver, not yours.

      • Shirley says:

        I have a grandson who is a dedicated saver and simply “tight as a tick”. When he calls or sends an email to thank me for a cash gift, he tells me that he has added it to his savings account and what he hopes to eventually buy or spend it on. I love that!

        In fact, he saved all of his money and paid 50% down for a brand new pickup when he turned 16.

  3. Strebkr says:

    Gifts in the form of cash or gift card are meant to be spent. It could have been a 10 dollar toy they only half wanted to 10 dollars in cash. Let them use the 10 dollars to find what they really want. At a young age I think this is prefectly acceptable.

  4. We always make our daughter put 50% away no matter what… And the rest she can spend on whatever she wants!


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