Letting kids make money mistakes

The case for stepping back

An 8-year-old who spends $5 on a toy that breaks on day two has lost $5. At 28, a similar mistake could cost thousands. Childhood is the cheapest time to learn how it feels.

Rescuing every time removes the feeling. Your child gets the toy anyway, and nothing changes. The lesson sits in the gap between wanting and having.

Which mistakes to allow

Use your judgment. The test is whether the loss is small enough that you'd shrug at it when you're an adult.

Set the size of the sandbox

The allowance is the sandbox. A small, regular amount means your child can fail often without harm. If you raise it to cover bigger expenses, the stakes go up with it, so do that on purpose. See allowance raises for how.

A lot of the learning comes from the gap between payday and the next one. Our page on what to do when kids spend it all covers that moment.

What to say afterward

The first minute after a mistake sets the tone. Skip "I told you so". Try one of these instead.

• "What happened?"
• "How do you feel about it?"
• "What would you do next time?"
• "Do you want help making a plan?"

Then drop it. Bringing it up again at dinner turns learning into shame.

When it is hard to watch

Letting go is harder for the parent than for the child. You may see the mistake coming. If your child asks for your opinion, give it once, calmly. If not, let it be. Kids need to own the choice for the lesson to stick.

1. Share the information once: "The reviews say it breaks easily."
2. Ask a question: "Do you want to wait a day?"
3. Respect the answer, as long as it is within the sandbox.
4. Be ready with comfort, not rescue.

Mistakes with gift money and bigger sums

Birthday cash can make a bigger mistake possible. Agree on a rule before the gift arrives, for example that half goes to savings and half is free to spend. That keeps the sandbox intact. For more ideas see birthday and gift money.

If your child wants to spend a larger amount, slow it down. Ask them to wait a few days and then decide again. The wait is a cheap test of how much they want the thing.

• Wait a day for small items and a week for larger ones.
• Ask what else the money could buy.
• Look up the price somewhere else together.
• Let them decide at the end.

Turning mistakes into goals

A regretted purchase is a great time to talk about a savings goal. "You wanted that bike, and now you're out of money. Want to set aside something each week?" Our page on savings goals for kids shows how.

If you use a tracker, the history shows where money went. Pouch keeps a history of earnings and spending on the device, which gives you something concrete to look at together.