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It’s Never too Soon to Start Teaching Kids the Financial Facts of Life

As parents, our challenge is to teach children the value of money management. However, only 56 percent of the parents surveyed the “2001 Parents, Youth and Money Survey” released by the American Savings Education Council in April could name only one example of something they’ve done to teach their kids about financial matters. Thirty-one percent were able to cite two examples, and 8 percent came up empty. Here are some ways to begin the process with the youngest members of the family.

Make learning fun. Preschoolers will love to set up a make-believe store with their toys as the merchandise, marked with color-coded coin values. You can trade roles with them as the make-believe shopper and sales clerk.

Once your children learn to read and perform simple math functions, board games with a financial focus can be an entertaining way to teach them fiscal responsibility.

Use allowances as an educational tool. When children understand that money can be exchanged for goods, they may be ready for the hands-on learning that comes with managing an allowance. Some experts contend that, for kids to learn effective money management, they need a steady, reliable income to budget and save – not one that’s based on their doing household chores.

Others believe that incentive-based allowances increase motivation and encourage positive behavior. Some families choose a middle ground and pay their children a base allowance, plus additional money for extra jobs they undertake on their own.

In any case, it may help to establish guidelines about how children may spend their allowances:

• Sharing – Church, charitable contributions and gifts for family and friends.
• Spending – Toys, candy and entertainment.
• Saving – The amount that needs to be set aside for things that cost more than the weekly allowance.

Help set savings goals. If your youngsters seem to “want everything,” it might help to work with them to create a wish list. Once a young person has identified his or her top priority, cut out or draw a picture of the item and tape it to a jar; and begin the savings program – perhaps depositing a certain amount from each allowance. Even the youngest children can learn the importance of goal-setting and saving money this way.

Set a good example. Children’s attitudes about money are usually based on what they learn at home. That’s why getting your own financial house in order is often the best way to mold your kids’ perspective. With the help of a knowledgeable financial advisor, you can make progress toward your own goals and set the standard for your family’s financial success.

November 22, 2001

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