A great gift for kids is a lesson in finances
— -- If your child is asking for Ugg boots, a pricey hot toy or a smartphone for the holidays, it's time for a teachable moment.
Even if your kid has less lofty tastes, the holidays are still a great time to hammer home some important financial lessons.
"Parents want kids to have everything they want, but if they're not teaching limit-setting, it's doing them a terrible disservice," says money coach Olivia Mellan.
Financial literacy expert Susan Beacham says parents have to lead by example. If they buy gifts for their kids that stretch their own budgets, they're only hurting their families when the bills cause financial hardship and stress in January.
Money is an abstract concept for young people, which can contribute to an "I want it all" approach to holidays. Studies have shown their brains don't develop enough to deal with such concepts until they're in their early 20s, says Beacham, who owns financial education company Money Savvy Generation.
That's especially true when young people don't pay their own expenses or make spending decisions.
Mellan, a psychotherapist and author, recommends giving children allowances "as soon as they are old enough to make change." That money should be divided into "spending, saving, investing and charitable giving," she says. Beacham sells a piggy bank with sections for each.
It may not look as good under the tree, but Mellan and Beacham say cash is a great gift. Coupled with that allowance money, your kids could get the gifts of their dreams — or might reconsider .
Children need to recognize the costs associated with phones, for example. The cost of a smartphone averages $50 to $300 with carrier contracts, says Bob Harris, CEO of utility comparison website WhiteFence. That doesn't include monthly bills, replacement costs or insurance.
Say your children are asking for $160 Ugg boots. Try giving them the money and let them see how far it could go at the mall if they chose less expensive footwear.
There is no shortage of options if you're faced with a budget-busting wish list from one or more children. If the $100 LeapPad Explorer kids' tablet is too pricey, Toy Industry Association spokeswoman Adrienne Appell suggests the $20 Disney AppMates (downloadable apps) for kids who are allowed to share a family tablet.
Legos and Barbie dolls were two of the most searched toys in the past two weeks, says digital analytics firm Compete. Compete retail expert Lindsay Steinbach says those reasonably priced — and more traditional — toys' popularity show "how much of a role parents have in influencing the toys that their children are interested in."
Appell recommends affordably priced collectible toys, such as the new DaGeDar balls that have different "personalities" and can be raced or used in play battle. They're good options for families trying to keep spending in check: "Kids can save their own money to build on their collection," she says.
Other ways to set limits this season:
•Get children of all ages involved in setting a holiday budget and deciding what gifts to give those outside the family, including grandparents. Beacham suggests coming up with "homespun" gifts that don't cost anything but are far more meaningful, such as biweekly calls or a letter as a present to grandparents. She has told her two daughters each year since they were in high school that all she wants is a letter from both of them at Christmas. And she gets and cherishes them.
Popular Reads
ABC News Live