Raising money-smart kids
August 23, 2004
If you want your kids to be smart about money, experts say you've got to start training them early. How can you raise savvy consumers? Here are today's 5 tips.
1. The art of the allowance.
Sounds simple enough right? Well, it's just the beginning. Simply handing money to a child doesn't necessarily make them any wiser. Neale Godfrey, author of "Money Still Doesn't Grow on Trees," has a few suggestions.
She says children need to be introduced to the "work for pay" concept early on. When they're little, even as young as three years old, have them do chores with you so they start to connect work with pay.
Make the world their classroom. Explain that you have a job so you can earn money to buy food. Introduce them to different jobs that allow people to earn money, like firemen and truck drivers.
To avoid giving them an entitlement mentality, be careful about what chores you're paying them for.
Godfrey says, "There are 'citizen of the household chores,' like cleaning their rooms. They shouldn't get paid for that." But you can reward them for helping out with setting table, recycling, dusting, vacuuming and sorting family laundry.
2. Banking it.
Take the time to look over the quarterly bank statements with them. You can even help them track their savings online.
3. Links with their world.
Do they love Disney? Are they inseparable from their iPod? Do they love sports cars or Harry Potter movies? They'll be able to track their investments and learn to read the annual reports they get in the mail.
You can even talk to them about how world events (like rising gas prices) might affect their investments. Check out www.oneshare.com where you can purchase single shares for gift and novelty purposes.
4. Cold hard cash lessons.
They'll soon find out for themselves whether they can afford trips to Starbucks and ice cream after the movies. When they run short, they'll learn to prioritize their spending.
5. Spender's ed.
Bottom line: Parents need to talk to kids about credit cards before they start getting solicitations. Parents need to explain in no uncertain terms that credit cards can cost a lot of money if bills aren't paid on time -- or all at once.
If you don't talk to your kids about credit the consequences can be scary. More people filed for bankruptcy last year (1.5 million) than graduated college (1.2 million). For more information on teaching kids about money check out www.childrensfinancialnetwork.com, www.MoneyInstructor.com and www.themint.org.
This is not a commitment for a loan or an ad for credit as defined by paragraph 226.24 of regulation Z.