The Psychology Behind Your Kids' Spending and Saving Habits

An Interview with Clinical Psychologist Dr. Michele Barton

To close out Financial Literacy Month, we spoke with our trusted consultant, Dr. Michele Barton, Clinical Director at CFI.  With a PhD in Clinical Psychology from the Albert Einstein College of Medicine and as a Visiting Scholar at Columbia University Teachers College, there is no doubt Michele knows a thing or two about the minds of kids. 

We picked her brain for her expert advice on how to handle our kids’ innate money habits.  From the spendthrift, to the penny pincher, to the kid who would give the shirt off his back, Michele helps parents navigate the spending, saving and giving tendencies of our kiddos.

How do we manage a child who spends recklessly?

Spendthrifts can get a bad reputation. These kids can be seen as foolish, irresponsible, and even reckless.  They are known to have trouble budgeting, and often spend on things that don't even bring them joy. 

Spendthrifts sometimes spend beyond their means, creating fear and other negative emotions around money. Positive emotional benefits of over-spending are short lived. 

However, spendthrifts are also described as free-willed and fun, and may be risk takers or sensation seekers.  Usually, the sensation-seeking behaviors will increase to higher stakes if not addressed in childhood. 

As parents, a focus on developing boundaries, budgets, and structure with finances early on is especially important with this group. 

What do we do about our little penny-pinchers?

Penny-pinchers can be divided into frugal kids vs. tightfisted kids. Frugal penny-pinching kids feel emotionally rewarded by saving money when making purchases and by getting a “good deal” for their money whenever possible. Bargains give them joy. Conversely, the idea of overspending when money could have been saved causes these frugal kids emotional pain. 

The tightfisted kids experience distress by spending money on all things, even things they actually need. Tightfisted children have been seen to even restrict themselves of basic human needs (skipping lunch, for example) to save money. 

It’s important for parents to differentiate their child’s penny-pinching style. Frugality can be healthy and much easier to navigate for lifelong financial health. Tightfistedness may be caused by a number of factors (trauma or parental job loss, for example).

Given proper financial support, these children can be re-educated to prioritize their needs and save in a healthy fashion.

What’s the best way to encourage a child who wants to give all of his money away?

Overly generous behavior can be a sign you have a highly sensitive and empathetic child. With proper guidance, you may even have a budding humanitarian. 

Generosity in kids can make them get attention from their peers for the right reasons, i.e., starting charities or donating to important causes.  In other cases, this generosity can attract attention for the wrong reasons.  

Generous kids might be susceptible to being taken advantage of, or possibly taught to put the needs of others ahead of their own (affecting, or stemming from lower self esteem).

Parents can provide tools (like the Benji Bank!) and informed support to promote healthy, balanced generosity and increased self-esteem.

Benji’s Bottom Line

No matter where our kids fall on the spectrum between spendthrift, penny-pincher or unabashed altruist, the key as parents is to recognize their tendencies and encourage a balanced approach to spending, saving and giving from the earliest age.