It may still be summer break in some parts of the country, but walk into any big box retailer and you'll see that back-to-school season is in full swing.
Families with children headed back to school spend a collective $84 billion on clothing, supplies, and electronics in preparation, with the average shopper shelling out nearly $700.
In addition to picking up notebooks and calculators this year, you can give your kids something even more valuable: a lesson in personal finance. The back-to-school shopping period provides an ideal teachable money moment. "It's very directly related to your kids' interests and their lives," says Ruth Freeman. "Children are concrete and their brains don't think terribly abstractly."
Here's how to make the most of the opportunity.
1. Start with a budget
Come up with an amount that you'd like to spend and talk to your child about how you came up with the budget. If your child is old enough to handle simple math, ask him to keep a running tab as you purchase items, so that you know where you stand in the budget. "As the kids get older, it's important to start giving them ownership over the process and have them help with the planning," says Sean Stein Smith, a CPA from Hackensack, New Jersey. "The actual ideas and mindset that you use during back-to-school shopping are the same principles and ideas that can apply to buying a car or purchasing a house or making big life choices down the road."
You might give older children cash or a debit card covering the entire budget and allow them to do the purchasing themselves. If they go over budget, don't bail them out. Have them either return the items that put them over the edge, go without items on their list, or find a way to earn more money to make up the difference.
2. Make two lists
Sit down with your child and make a list of items that she needs and a list of items that she wants. Start out with the things on the school-provided supply list, clothing, and other items necessary for the year. Then, go through the house and take inventory of which items you already have, either from older children, left over from last year, or just collecting dust in a closet.
Any items still in good condition can be crossed off the "needs" list, although if your child wants an updated or newer version, she can add that to her "wants" list.
Once you've got your list, you can return to your previously defined budget. Explain to your child that the budget needs to cover everything on the "needs" list. Once those items are purchased, any leftover cash can go toward buying "wants" items, or into your kid's pocket for future use. "Then all of the sudden, their decisions change, because they start thinking about the budget as their money," says Mike Sullivan, a personal finance consultant with Take Charge America, a national nonprofit credit counseling and debt management company.
Agree together to stick to the list when you're out shopping. If your child wants to make impulse purchases, stop and talk about the impact such buys could have on your budget and think through whether it's worth going through with the buy.
3. Spend some time comparison shopping
Whether you're shopping online or in physical stores, this is an opportunity to show your child how much prices can fluctuate on the same item — and how much they can save by finding a lower price. "You should talk not only about the price but also about the quality of an item," Freeman says. "If you need a notebook for the entire year, they need to think about how well it will hold up along with the price."
There are some great apps — including RedLaser, which compares prices, and RetailMeNot, which offers mobile coupons — that can help with back-to-school shopping. Download them and let your phone-obsessed child put them to good use. You might also ask them to scan Facebook and Twitter for additional coupons put out by retailers. Kids can also ask retailers whether they offer a student discount.
If you're purchasing a large item such as a laptop or a musical instrument, you might want to try a second-hand store or online retailers to see whether you can get a deal on one that's pre-owned. It's important to show your child that there are options for shopping outside of the mall and Amazon.
4. Point out "hidden fees"
If your state has a sales tax, explain what a sales tax is and how it will affect your budget. Many states offer a sales tax holiday this time of year. The limits and covered items vary by state, though, so read the fine print on your state's policy at the Sales Tax Institute's website. If you're shopping online, help your child factor the cost of shipping into any purchases, and allow them to see the potential savings available when getting free shipping, for both deliveries and returns.
5. Stick with cash
Particularly if you're shopping with younger children, using cash for purchases makes it easier to visualize how each purchase affects your overall budget. Additionally, studies have shown that going shopping with cash leads to lower total spending.
If you have older children or you're a no-cash household, take the time to talk about how credit works and how you'll pay for the items that you purchase. Talk about it while shopping, and then show your child the bill when it comes and let them watch you pay it. "It's important to close that loop and really explain that credit is a tool that gives you flexibility, but you're going to owe those funds at a future point in time," Stein Smith says.