Financial Psychology: Parenting a Spendthrift

Is your child a Big Spender?

Some kids out there will spend their money at the drop of a dime. Whether it's a pack of Pokémon cards, a watermelon-flavored Lip Smackers or bag of rainbow Skittles, money burns a hole right through those little spendthrift pockets.

While there is no doubt that everyone falls prey to a little impulse buying from time to time, spendthrifts just can’t seem to hold on to their hard-earned allowance. But you can bet your bottom dollar that young spendthrifts can grow up to face real money problems if that impulse to squander isn’t nipped in the bud at an early age.

Some financial psychology behind the spending

Kids who are spendthrifts are often free-willed and fun, and are sometimes bigger risk takers or sensation seekers than their peers. While these spendthrifts may be the life of the party, they are often cash poor and out of luck since those dollars seem to consistently fly right out of their little fingers.

Because of these spending tendencies, spendthrifts can get a bad rap. Kids who spend their money with little thought can end up spending beyond their means and buying things that don’t truly give them joy. While the buyer’s high is real, big spenders can crash hard when they’ve exhausted their money on yet another impulsive purchase.

As adults, spendthrifts can be seen as foolish or irresponsible, and can lead to a cycle of spending and debt that can be increasingly hard to climb out of.

So how do we handle a cute little allowance-yielding wastrel?

Get back to good money habits

Patience, consistency and teaching through experience. As Benjamin Talks Co-Founder Carissa Jordan relates, “It comes as no surprise that my boundary-pushing, thrill-seeking, instant gratification-needing 4.5 year old is also a spendthrift. When you combine this with the fact that he is the third child (with inevitably more relaxed rules), the money conversation is quite different from his siblings. Bringing him into any store, whether it's the grocery store, toy store or even UPS (he just NEEDED a card with a puppy on it!) causes me to break out in a cold sweat. He immediately demands everything and always promises to give me money from his Benji Bank. Parenting this little spendthrift can be a great challenge, and I’ve learned a lot through trial and error. Some things that have worked are discussing the plan before and during each shopping excursion, speaking in a calm but firm voice that we need to stick to the plan, suggesting we take a picture or write down what he wants and come back for it, and sometimes just letting him tantrum with all eyes on me. In those moments it’s so hard to not capitulate, but I know any embarrassment I may feel is worth it in the long term by not giving in to his spending demands.”

Focus on boundaries and budget

As parents, we can focus on developing structure, boundaries and budgets around finances from the earliest age. By helping kids divide any incoming cash into Spend, Save and Give containers (hello, Benji Bank!) and practicing budgeting for a bigger ticket item, little spendthrifts can build the financial muscles they need to withstand the impulse to buy.

Download our budget tracker to help with budget practice!

Is your child more of a saver? Here’s our guide on parenting a penny pincher. Maybe you have a giver on your hands…. we’ve got you covered with our guide to teach your child to balance their giving tendencies.