Helping Kids to Learn How to Save for Big Ticket Items.

Wouldn't it be fantastic if every idea about something we wanted magically happened? We wouldn't have to do a thing except think: "I want... a swimming pool... an iPod... a new computer..." This is how many kids think. Adults know, however, that simply wishing for something doesn't make it so, and that setting realistic goals sure helps. As parents it's our job to help our kids connect the dots between their wishes and financial reality.

The "wish list" is a tool parents can use when their children start begging for something that's an "extra." Parents can respond, "Feel free to put that on your wish list."

The beauty of the wish list is that it can be used for both the little and the big things kids want. The bigger the price tag, however, the more planning is needed. This is where parents can introduce the "Five Steps to Wishing Well," which are five action steps to take when your child's wishes are bigger than their bank account:

Step 1: Start a wish list.
Step 2: Prioritize the items.
Step 3: Research the cost of each wish.
Step 4: Assess current savings.
Step 5: Estimate the time, do the math, and plug in the numbers.

Step 1: Start a wish list.

About Kristan Leatherman, M.S.

Kristan is a family life consultant in private practice. She has a master's degree in counseling and has been consulting with parents since 1988, on topics as varied as how to handle a reluctant tooth brusher to how to handle a disrespectful teen. Kristan is affiliated with the Love and Logic® Institute
(www.loveandlogic.com) as a faculty member, speaker and author. She is co-author of two books with Jim Fay: Millionaire Babies or Bankrupt Brats?; Love and Logic Solutions to Teaching your Kids about Money and the newly released Love and Logic Money-isms; Wise Words About Raising Money-Smart Kids.

Kristan’s commitment to helping parents raise respectful, responsible and self-reliant kids is reflected in her workshops, books and consulting practice. Check out her website at
www.RaisingMillionaireBabies.com. She loves to hear from her readers. This e-mail address is being protected from spambots. You need JavaScript enabled to view it with your comments and questions.

Begin by inviting your child to write down his or her wishes if they haven't already done so. Coach them as necessary to jot down what they want "to be," "to do," and "to have" in life. Committing their dreams, wishes and ambitions on paper helps kids clarify what's important to them.

Step 2: Prioritize the items.

Once your child has a wish list, instruct them to number each item according to its priority. Most kids won't have trouble picking their most important goals, but since not all goals will be quickly attainable, kids may need coaching to numerically choose one item over another. Wise parents use a written plan (see planning chart on page 17) and ask questions to encourage their child's thinking, so that the child discovers how to create priorities that are fiscally logical.

Step 3: Research the cost of each wish.

Encourage specifics. This step is a fact-finding mission. Get the precise cost of items when possible, otherwise teach your child to estimate or research the approximate cost of each list item.

Step 4: Assess current savings.

Assess how much money, if any, your child has already saved, and how much of their savings they want to apply to their wishes. This will determine how much more money they'll need to save and/or earn to achieve each goal.

Step 5: Estimate the time, do the math, and plug in the numbers.

Help your child learn to both set a date for achieving each goal, and to calculate how much money needs to be saved within a planned time period (i.e., weekly or monthly) to reach each goal by the desired date.

Some parents go through these steps one wish/one worksheet at a time. Others encourage their children to group like items together (inexpensive vs. expensive items, short term vs. long-term goals, etc.).

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For long-term goals such as saving for a car or contributing to a college fund, parents can use the matching funds idea:

Matching funds are a cost-sharing arrangement in which parents (or grandparents, etc.) contribute a set amount for each amount their child contributes. The cost-sharing arrangements can be dollar for dollar, or another arrangement, such as an 80/20 split, according to what seems appropriate for the desired goal and for the child's age and financial ability. Establish a written contract that spells out the payment agreement and is signed by the child and adults.

By using the wish list and written worksheets as tools, parents can avoid struggles with saying "no" or the urge to argue about the impractical nature of the wish. Parents report that these processes give their children an opportunity to practice finding out if their wishes and financial realities will match. Shopping with your child becomes an opportunity for financial learning; no lectures or fights are necessary. Parents find freedom from the tyranny of begging or the need to explain once again, instead parents can smile and say: "Feel free to noodle that out on your wishes worksheet and let me know what you decide."

And if your child says to you, "But you can afford to buy me a ___________!" parents can answer with confidence, "Sweetie, it's not in my budget either"... something our kids will be learning the meaning of firsthand!

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