One of the most fundamental principles parents try to instill in their children from an early age is that saving is critical. After all, without saving, it can be extremely difficult to ensure some degree of financial security for the future. Given the importance saving has, you might think that it’s impossible for kids to save too much. You’d be wrong.
For many children, it’s a struggle to resist the urge to impulse buy, even when they know saving is an option. Other children, however, become virtually obsessed with watching their little nest eggs grow. They hoard their funds to the point of near compulsion, sometimes even looking for ways to make extra cash.
When a child is a savings hoarder, it’s problematic because he doesn’t really internalize that saving isn’t done for the sake of saving. It’s done with a specific purpose in mind, such as buying a new toy, or later, a car or a house or a nice retirement. If all your child is doing is seeing how high his stacks of coins and bills can get, then his focus is on the method toward the prize, not the prize itself. This is particularly detrimental when your child remains blind to the fact that the prize can be helping others, because it keeps his view so egocentric.
Another big issue with savings hoarding is that it prevents your child from having the meaningful transaction experiences that give him a broader understanding of commerce and economy. This is true not only on the numbers level (i.e., his sale contributes to x percent of the store’s revenue), but also on the emotional or satisfaction level (i.e., buying feels good). Without these experiences, it is very hard for your child to develop effective buying habits and to feel like the process of purchasing is normal.
So what can you do if you see your child has a death grip on his pennies? The easiest solution is to work with him to set specific spending goals, much in the same way as you do for savings goals. For instance, he might have a goal of buying one food item he’d like for a snack, or he might buy a mid-level pair of earbuds for his digital music player. Ideally, the items should be something he’ll use, but there’s also nothing wrong with him buying something just to express himself once in a while, such as a picture for his bedroom wall. If your child does not have a specific good he’d like to purchase, encourage him to donate to charity.
As you develop spending goals with your child, remember: Your child does not need to spend an enormous quantity of his savings, nor does he need to spend on a particular schedule. He just needs to buy enough so that he realizes that money can do something other than sit in the piggy bank. Your job is not necessarily to tell him what to buy (even a bad purchase can teach him something), but rather to show him how.