It’s that time again- time to stock up on back-to-school supplies. Spiral notebooks, paper and pencils and clothes are going to cost you! The average family plans to spend $630 this year (according to the National Retail Federation).

Why is it important for parents to teach their kids about money?

Whether parents want to or not, they carry the most weight when it comes to teaching kids about money. In a recent study, 58% of millennials said their parents’ advice or example was the most influential in how they handle their own finances (according to Bank of America and USA Today.) But, nearly three-quarters of parents are at least somewhat reluctant to talk to their kids about financial matters (according to a study by T. Rowe Price.) It’s time for parents to step up to the plate, starting with “teachable” moments like back-to-school shopping.

What are some lessons parents can teach kids through back-to-school shopping?

  1. Building a Budget

Surveys show relatively few kids monitor their spending and stick to a budget. It’s probably not a surprise, considering they are young and many of their parents don’t even have budgets (less than one-third of Americans keep a household budget, according to Gallup.) This is a great opportunity to teach kids how to set up a spending plan. Write down all of the supplies they need and set a spending limit for each one. This will help teach your kids how to comparison shop. They may find they can’t afford the name-brand shoes or the top-of-the-line electronics if they’re going to stick to their spending plan.

  1. Wants vs. Needs

Probably every parent has been frustrated when they heard their kid say “I need this toy, game or piece of clothing.” But many adults have a problem distinguishing wants vs. needs in their own lives. After you’ve set up a budget with your kids for all of the necessary school items, they may have a little extra leftover. They can use this for a “want” purchase. This is a hands-on example to demonstrate to kids that the bulk of your money is for needs and to choose their wants wisely.

  1. Factor in Extras

One of the quickest ways to blow your budget is not to take into account extra costs, like shipping fees or even sales tax. When you’re shopping with your child, don’t just look at the price tag, be sure to factor in those extras. This may be the first time they’ve ever taken them into account.

  1. No Bail Outs

Don’t be quick to bail out your kids if they get into a cash crunch; mistakes can be great teaching moments. They’ll remember it years down the road if they run out of money and can’t afford something they want. Obviously, if they can’t pay for a supply they need, you may have to make up the difference. If that’s the case, you can set up a system for the kids to pay it off like doing lawn work, cooking or laundry.

  1. Credit Card Effect

Many kids think credit cards are magic, which explains why so many college students and young adults rack up debt without understanding it. Once you’ve made all your purchases, total up your spending. Then use an interest rate calculator to give the kids a real-world example of how much the interest can cost. For example, if you spent the average $630, with an 18% interest rate and making the minimum payment each month, it would take you 67 months to pay it off, and cost you an extra $368 in interest! I have an interest rate calculator on my website. You can play around with different rates and payments to drive home the point.