Clever Ideas for Kids' Christmas Cash

Gift cards seemed to be all the rage this season, and my oldest child received more than her share of iTunes credits.  There is always that relative that doesn't know what to get my kids, however, and cash seems to be the simplest option.  (My kids are never disappointed by this gesture.)

For the kid who doesn't often get large amounts of cash, however, the gift of "green" can be a bit overwhelming.  The temptation to blow it on candy, or junk toys, or even on video game downloads can be strong; a wise parent will have a plan in place BEFORE the holidays to handle such matters with grace and without tears.

If you are not sure what to do with your child's cash gift, here are some ideas.  All have been tested in our family with high marks!

1.  Split it into categories.  I am a firm believer of starting children young with habits of asset allocation.  We have our children divide any money (allowance or cash gifts treated equally) into "buckets" for saving, spending, and giving.  Saving is used for college.  Spending is their "fun money." Giving goes to the charity of our family's choice.

2.  Let them run wild with the cash -- up to a point.  I don't get too bent out of shape when my kids want to use their "fun money" in stupid ways.  It is how they learn, after all.  Since I know that they've safely socked away a good chunk for "saving" and "giving", I don't worry when they want to dump $5 into a trading card habit or on clothing-staining gumballs.  If it is allowed in the house, they can buy it; they may not consume it at once, however.

3.  Older kids must use modern tools.  The little ones (ages 12 and under) can use cash to pay for purchases.  My teenage daughter, however, must put a portion of her cash gift onto a prepaid card.  She has been using one since she turned 13, and she has become quite the pro at buying items in the "self-checkout" lane with her card, tracking her purchases, and budgeting for items she really wants.  I like that I can see exactly where she is spending her money.

I have been very pleased with how receptive our kids are to "the rules." It keeps us talking about money on a regular basis, and I think it will help them become responsible with their money as adults.

Not sure how to get a prepaid card for your teenager?  BillMyParents has a reloadable prepaid card that is perfect for first money lessons.  Kids 13+ can this use SpendSmart prepaid MasterCard anywhere Mastercard is accepted, and friends and family can "gift" for future holidays directly to the card!  Learn more at BillMyParents.

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