Go to blog home

Making well-informed spending decisions

  • 07-12: Young Kids
  • May 2024
  • Premier America
Just like deciding which ice cream flavor to choose or which game to play, spending money involves making decisions too. We'll explore some cool concepts like scarcity, preferences, and trade-offs, and we'll also see how things like ads and friends can influence our choices. So, let’s get started and become super smart spenders!

Understanding Scarcity, Preferences, and Trade-offs 

  • Scarcity: Imagine you only have five apples but you need six to make a pie. That's scarcity—it means we don't always have enough of everything we need or want. This makes us have to make choices.
  • Preferences: Everyone likes different things. Maybe you prefer chocolate ice cream over vanilla. That's a preference. People choose to spend their money on things they like the most.
  • Trade-offs: If you have money to buy only one toy, choosing a skateboard means you can't buy the video game you also want. That choice is a trade-off. You trade off one thing for another based on what you value more.

Behavioral Factors Influencing Spending 

  • Peer Pressure: Sometimes, we want things because our friends have them, like the latest sneakers or a popular video game. That’s peer pressure affecting our choices. 
  • Advertising: Ads can make toys or snacks look super fun and yummy. They're designed to make us want to buy things, sometimes even things we don’t really need.

Different People, Different Choices 

People have different amounts of money and like different things. Some might spend money on books, while others might save for a bike. What we choose to spend our money on can make us or others happy. 

Opportunity Costs 

When you decide to spend your allowance on a movie ticket, it means you might not have enough left for that cool new toy. The opportunity cost is what you give up when you make a choice to spend your money on something else. 

The Impact of Decisions 

  • Costs and Benefits: Every choice has a good and a bad side. Buying a candy bar gives you a tasty treat (that’s a benefit!), but it costs money and isn’t healthy if eaten too much (those are costs). 
  • Influences on Purchases: The price of something, what your friends buy, or a cool commercial can all influence how you decide to spend your money. 

Ways to Pay 

When you or your parents decide to buy something, you can use different ways to pay: 



Debit Cards

Credit Cards
Physical money you can touch.  A piece of paper that tells the bank to give money from your account to someone else. A card that takes money directly from your bank account.  Like a debit card, but it lets you borrow money to buy things and pay later. This will help you start building credit. 

Making decisions about spending money can be tricky but also fun! By understanding scarcity, preferences, and trade-offs, you can start making smarter choices. Remember, every spending decision has an opportunity cost, and various factors like ads and friends can influence what you buy. Whether you’re using cash, a card, or even a check, thinking carefully about your spending will help you get the most out of your money and maybe even save some for the future. Keep exploring these ideas, and you'll grow into a wise spender! 
Youth Smart Savings
With a Youth Smart Savings account, earn 5.00% APYon balances up to $500.