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Kids may recognize the difference and just not care.
You know how much money you have in the bank (or a general idea). You know how much debt you have. You know there are some things you can afford and other things that you cannot. You know where you’re willing to spend your money and where you are not. Ultimately, you have a very clear picture of your own money situation. Others don’t have anywhere near the same information about your financial situation as you do.
Everyone is in a different situation financially. Some are far better off than others. It’s unlikely you know about the financial situation of your neighbors or friends. While you may have glimpses of their situation, there’s likely far more going on than you can see. Just because someone is spending money on many things doesn’t mean that they actually have the money to pay for those things.
Don’t get sucked in to trying to keep up with those around you. Even if you have the financial means to do so, you shouldn’t be trying to buy things simply because someone else you know did. Buy things that are meaningful to you and that will make a difference in your life. Don’t buy things simply to look cool or to try to impress someone else. Those purchases likely will be the ones you regret later.
There’s a good chance that you are worried that your child might think that you’re poor if you’re not buying everything that they want or that you can. While many kids have a good grasp on money and how much you have, many kids also only know that they get certain things and not other things. There’s a good chance that your child may realize that you don’t spend a ton of money on things.
While that may be a problem for some kids (especially those that are spoiled), most kids understand that you don’t have unlimited funds. While money can bring physical goods that may make your child materially happy, a strong relationship with their parents is far more meaningful. Use money to have memorable experiences with your child in which you can bond - it will mean far more to them in the future.
If you’re worried that your child may think that you're poor, or that they have friends who are better off than you are, be sure to talk to them about the situation. You don’t have to lay out your financial situation in detail, but talking through why you make decisions to buy certain things and not others can be a great learning experience for your child. The more they learn about finances while young, the better off they’ll be when they get older.
Help your child understand that money provides necessities. Extra money should be saved for future expenses. You should also set aside a little bit of money for yourself, but money isn’t going to truly make you happy. Some people may seem happy because of all of the things that they have, but true happiness is generally found from mental and spiritual balance in life. Money can help make those things happen, but it’s not a requirement.
Talk with your child about money, and help them to see the importance of money, but also that money is only a part of happiness - there are many other important factors which make a person truly happy.