Why Gifting Your Kids Money For The Holidays Is A Great Idea
Monthly Money Tips that help parents impact their kids' future
Happy holidays, fellow parents! This article is something that’s very relevant for the recently concluded holiday season. I'm going to be talking about gifting your children money for the holidays.
Sometimes we’re stuck between:
- giving our kids things they’ve always wanted (like a toy, shoes, clothes, etc.)
- giving them money so that they can have more freedom with the gift you’re giving them.
As an advocate for financial responsibility in kids, giving your kids money for Christmas is a good choice.
I can feel that this decision might raise some eyebrows for some. But let me explain why I think money-gifting is a good idea.
Gifting the kids money allows you to engage them in money conversations.
When your kids open their presents, you can begin to talk to them about money. You can talk about saving it for the future or allocating money in different “budgets”. It is also an opportunity to give them light tips about responsible financial ownership
You can also consider gifting your child a piggy bank together with the money. That way, you can nudge them towards putting all (or a part of) the cash into the piggy bank.
Reminder: The money you are giving them are gifts, meaning there should be no strings attached.
When you are gifting your children money for the holidays, you have to remember that the money you are giving them should not be subject to too stringent “savings conditions”. You shouldn’t tell them that they can't spend the money. The money you give them is theirs and they should have the freedom to spend or save it in any way they want to. But you should certainly engage them in a dialogue around what they want to spend on and why it would be sensible to save some.
We want to give them confidence in the choices they make involving their own money. You are using the gift as a tool for opening up responsible spending and saving habits with kids.
I don’t recommend gifting cheques or digital money to younger children. Cheques are very abstract concepts and children cannot understand deep abstract concepts yet. They are still not able to understand that a piece of paper with the amount written on it can equate to real money.
Stick to cash for younger children as it is more concrete. As I mentioned in one blog post, it is important to concretise the concept of money.
Take advantage of kids' receptiveness for tactile and kinesthetic experiences.
I recommend breaking the bigger bills into coins or smaller bills! Because this allows a more tactile experience for them. They can count smaller bills so that they can see how coins or smaller bills can make twenty, fifty, or even a hundred! This imprints to them that even the smallest amount will contribute to wealth-building.
Aside from that, don't be dismissive when they ask you follow up questions as you give them tips on saving. Children are naturally inquisitive and curious beings, so they are bound to ask. Use that to your advantage. Explain the importance of saving but also don't forget to remind them that the money is theirs.
Be responsible money gifters!
Part of responsible financial parenting is making sure that our kids do not create unrealistic expectations on receiving money. So I would like to remind you to discuss expectations with your kids.
Do not forget to explain to children the concept of gift and that the money given are gifts. You have to let them know that they should not expect to receive such amounts every Christmas or special occasion.
When you give cash gifts that children will personally be handling and counting, make sure that the amount is appropriate for their age. There's no point in handing over something like $1000 dollars to a 7-year-old. They won't be able to understand the immense value of such big money. The things they want won't reach that value anyway. You’d rather gift them a smaller amount they can manage themselves, and transfer the rest directly onto their savings account, for example.
Fellow parents, I hope you and your family have a very wonderful holiday celebration. I hope this quick article helped you decide on whether you'll be giving your child money for the holidays or not.
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