Seeing the smile on your son or daughter’s face when you surprise them with the latest toy they have been talking about non-stop, or an excursion they have been dying to go on is a priceless feeling.   Nothing is better than spreading joy to a child.  However, is there such a thing as too much giving? It’s understandable that parents would like to give the best to their kids, but when treating your children to gifts and surprises too often, potential problems can arise.  This is especially true when it comes to money.  Here are five reasons why you should only give a small amount of money at a time to your kids, even if you’re rich:

1. Spoiling your kids can lead to poor behavior and attitudes later in life

David Bredehoft argues in his studies on Childhood Overindulgence and Young Adult Dispositions that overindulging your children by giving them too much money, or toys can result in dysfunctional attitudes as they transition into young adulthood. In his studies, the more spoiled a child was, the more self righteous they were likely to believe themselves to be.  Furthermore, children that had been over indulged tended to see themselves as less effective than the children from other groups.

2. Teaching your kids about wants versus needs

Whenever kids have too much money at a time, it is all too easy for them to satisfy every desire on a whim.  Every child will naturally want the latest toys to come out, like a gaming console, or perhaps the new iPhone that just hit the market. This is normal behavior, as constant bombardment by the media practically trains our children to seek out these luxuries.  Because we live in a society that rewards instant gratification, it is important to instill in your kids the differences between wants and needs at a young age, so as to prevent bad spending habits later on in life. One way put this concept into perspective is by explaining the amount of work required to obtain the money for a specific purchase.  For example, if your child learns that it takes an average of say 30 hours of work to buy a Playstation 4, ask them how willing they would be to work that many hours, on top of the amount of time it takes to pay for things like food and shelter.  This can help them to appreciate the amount of extra work necessary for the luxuries they desire.

3. Giving only small amounts of money imparts big lessons on savings

Building upon the last point, if a child is adamant about wanting something, giving it to them straight away might not be the best decision. By setting a weekly allowance, parents can teach big lessons about the importance of savings.  If your child wants a new item, they will have to save up to be able to afford it, which means limiting other purchases.  This will prevent your child from developing the bad financial habit of impulse spending. Whether or not you require your child to complete chores to receive the allowance is up to you.

4. Kids don’t recognize the actual value of money

With the advent of the digital age, the value of money is becoming less and less recognizable for kids.  With the increased use of credit and debit cards, rare is the case anymore when money is actually changing hands during a purchase.  Without the tangible exchange of paper money, it can often be difficult for kids to realize the significance of the spending that is occurring. A recent survey by T. Rowe Price on brandable domain names reports that while 60% of kids say they participate in online shopping, almost 75% rarely, if ever, go to a bank.  This disconnect between the purchases our children are making, and the actual financial institutions that facilitate them is troubling, to say the least. By making your kids give you real paper money in exchange for the use of your credit card for an online purchase, you can help them to realize the value of the money they are spending.

5. Giving your kids too much money can build the wrong sort of expectations

Giving your kids too much money may be setting them up for failure from the start.  Kids who have constant access to money will quickly become accustomed to a certain sort of lifestyle, and they may continue to expect it as they grow older without ever learning the action necessary to maintain their desired standard of living. What happens when they are released into adulthood and no longer have an endless supply of money to support them?  Certainly the results are not pretty.  The best strategy is to limit the amount of money your kids have from the start.  This will prevent attitudes of entitlement from ever developing, and limit the false expectation that the gravy train will keep on rolling forever.  Your kids will learn that there is no free ride in the real world, and instill in them a work ethic that will benefit them for the rest of their lives. Featured photo credit: Spc. Bobby Allen via flickr.com