Real Money, Real Families: Should kids buy whatever they want?

By Luke Erickson

When my kids earn money we divide it into three categories for saving, sharing, and spending. With their spending money we usually try to give them some guidance along the way, while still allowing them to make their own decisions. After all, learning from their own spending mistakes while they’re young can spare them much bigger spending mistakes when they’re older. At least that’s the story I told my wife when my four-year-old brought home a giant stuffed unicorn that was surprisingly cheap but literally twice as big as she is (true story).

One of the hardest lessons to learn for our kids so far is that of opportunity costs. Yes, opportunity cost, that old economic principle that we all learned of as freshmen. It always helped when my economics professor used Taco Bell tacos and burritos in his examples (true story). “If you have 10 bucks and order ten tacos, you won’t have any money (or belly space, professor?) for burritos. The opportunity costs of your order of tacos therefore are the burritos you could have enjoyed instead.” So yes, eating tacos doesn’t just cost us money, it also costs us the burritos that we shall never consume (however, clogged arteries and digestive tract issues would come with either choice FYI).

Recently my ten-year old came into a considerable sum of money (for her anyway) due to a confluence of birthday gifts, Christmas gifts, and allowance. She asked me to take her to the store, so like the good father/professor that I am, I chauffeured her whilst discussing the limitations of her money. “This sounds like a lot of money, but it won’t take very long to spend it all if you’re not careful with it…” and other equally valuable words of wisdom.

“Okaaay daaad…” Tough crowd. Not her first time hearing one of my seminars apparently. We went into the store, and I let her peruse the wares of the fine establishment. By the way, am I the only one who finds it ironic that this supposed “Wal-mart” doesn’t even sell walls? They don’t even have walls, just a bunch of shelves. They should have called it “Shelv-mart.” And don’t even get me started on this so-called “Target” store!

Where were we?

Ah, so my daughter spent a good deal of time looking over her options. It seemed that there just wasn’t anything that really caught her attention. I told her that if she didn’t find anything that she really wanted she should just save her money and we could do some more shopping online or at other stores. Of course, I seized the moment and quickly jumped into part II of my seminar about how another option was to save her money for something bigger and better later on. And I totally convinced her to save her money (not a true story at all). Okay, so she didn’t much like my ideas. Instead, she returned to the shelves of plastic and emerged with something I knew she would like…but at an exorbitant price.

One last time I asked her if this is what she really wanted to spend her money on. I didn’t use the term “opportunity costs” because, well, I’m a hip dad, aside from the fact that I just used the word “hip” to mean cool (i.e. sick, lit, dope – you’re welcome for the translation kids), but I did explain that by spending her money on this overpriced toy she wouldn’t be able to buy anything else with that money. She rolled her eyes and said, “I know dad.” And off we went to the checkout line.

We got home, and she opened her toy and enjoyed it well enough. Then – you can tell where this is going right? Only a few days later we were at a family friend’s house where one of her close friends had a baby Grogu toy (aka baby Yoda) from the Disney series the Mandalorian. She instantly loved the cute little green baby Grogu and asked if she could get one. Like the dutiful professor I am I seized the moment to amplify her pain and help her see the error of her ways. “Nope! But you could have had it if you hadn’t spent all your money on that other cheap overpriced toy!” Then…I did a mic drop and walked out of the room (not totally a true story, I wasn’t actually using a microphone).

The truth, I felt her pain a bit, because that little green guy is adorable. We talked through baby Grogu as an opportunity cost to her earlier decision to spend money; I gave her a hug and told her that it’s a great thing to be able to save our money for things we really want, and not just spend money on stuff we sorta kinda want in the moment just because we have money to spend. And I totally changed her life and she’ll forever be a wise spender and live happily ever after and thank me profusely for imparting my wisdom to her (yeah, not even close).

Okay, the truth is that I have no idea whether this lesson will stick with her or not. But wise spending habits aren’t built in a day either, right? They happen over time and particularly during a child’s formative years where they form their life paradigms – the perspective they will have on the world as they move into adulthood. And maybe, just maybe with enough opportunities to talk over the pros and cons of their spending decisions, kids might avoid some pretty costly spending mistakes later in life. So, I guess as a parent I’ll have to be patient and keep sharing gentle lessons on wise spending on a regular basis in hopes that some of it will sink in.

Or…as a professor I might just tell my kids to go buy a cheap giant unicorn at Shelv-mart and soak it with tears of sorrow from all of their spending failures that resulted from their father’s inability to teach them properly. And I’m out (clumsy totally unhip mic drop).

Luke Erickson, Ph.D., AFC®, REALTOR®, is an associate professor of personal finance for the University of Idaho. He lives and works in the Treasure Valley. Luke and his wife Rachel have been married for 15 years and live in Meridian, Idaho with their four energetic children. Got questions or comments about kids and money? Email them to and he’ll respond in future articles.

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