Question: How do you handle it when kids get gifts of money? Our children, who are 8, 9 and 10, often receive up to $100 at a time from family members, and they insist on spending it all in the first store they see.
Answer: First off, Mom and Dad, children who are 8, 9 and 10 shouldn't be "insisting" on anything. You're the parents, and even though your kids receive the money as gifts, you can set some rules on how it should be spent — or not.
Having chided you for being softies, I don't recommend that you go to the opposite extreme and whisk the kids' money off to the bank. Nothing is less gratifying and more frustrating to a child than money that arrives in a card and promptly disappears. Besides, the gift-giver probably wants the kids to buy something they want.
So how do you strike a happy medium? Here are three suggestions:
Require the kids to save a certain amount of their gift money — say, 10 percent or some other portion that's easy to compute — and let them spend the rest. This works best if the kids are already accustomed to saving a portion of their allowance money or earnings.
Deposit any gift checks in the bank and let kids spend the cash. This works best if the kids get a workable combination of checks and currency. That was always the case in our house. When my children were young, their grandmother sent them bills in the amount of their age, plus a larger check for me to handle. In fact, saving the checks became so ingrained in our kids that when our oldest son was a teenager, he was shocked to learn that you could actually deposit cash in a bank.
Set spending rules based on a child's age and the size of the gift. For example, preschoolers might be allowed to spend gifts of up to $20, and 6- to 12-year-olds would get to spend gifts of up to $50. Anything above that would be saved for another day.
Regardless of a child's age, gifts over $100 require some parental input — and perhaps a chat with the giver, too. If you think your relatives are being overly generous, tell them to ease up. If they insist on indulging the kids, open a college savings account and ask them to contribute to a gift that will last.
Have a question about kids and finances for Dr. Tightwad? Write to Dr. T at 1729 H St., N.W., Washington, D.C. 20006. Or send the good doctor an e-mail message (and any other questions for this column) to jbodnar@kiplinger.com.