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Kids and Money: What To Do With Christmas Cash

Each 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 [3]. 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 [4]. 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 [5] 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 [6])