“I really need it. All my friends have one.” If you are a parent of a young child, such exclamations are probably common in your household.
There is no universally accepted plan for teaching children about money, but through instruction and example, you can help your child develop good money skills that will last a lifetime.
So how should you prepare children to meet the financial demands they will meet as adults?
When and how to begin
Children as young as age 4 can start learning how to divvy up available funds into different categories.
The Money Savvy piggy bank, with chambers labeled save, spend, donate, and invest, with stickers to remind your child of his or her specific goal, such as saving for a bike, is a way to start.
As soon as the child is old enough, take him or her to the bank and set up a savings account, which will present the opportunity to learn about interest on the deposit.
Check with two or three, as not all banks are child-friendly. Some require minimum deposits that are far higher than most children would have.
When to teach
The best time to teach a child anything is when he or she expresses an interest. So when the child begins asking you to buy candy or toys, be prepared to begin a discussion about money.
Start by demonstrating that money is used as a trading tool. People trade money for items of value or for services. Show your child how money works by allowing the child to make his or her own purchase. Give the child the required amount of money for a toy and let the child hand the money to the cashier. After you’ve left the store, talk about how the money bought the item.
Approach money lessons with openness and honesty. Give children clear and consistent information about money. Tell them why they can, or cannot, have certain items.
Careful not to confuse
What you say about money and how you and your spouse communicate about it also affects your child’s perception of money.
Did you ever put money into a child’s piggy bank, but then “rob” the bank to pay the paperboy when he came to collect? Children watch you and see that it’s okay to rob Peter to pay Paul, and they will do that later in life because you did.
If you want children to learn how to handle money responsibly, you will have to give them a fair amount of control over how they use their money. At the same time, you should let them know there are right and wrong ways of handling it.
A child’s first year in school is about the time he or she should begin receiving an allowance, and with it an ongoing course in how to spend, budget, and save money.
How much weekly allowance is enough? While some experts recommend giving $1 for each year of age, what’s right for your child depends on three factors: the child’s level of development, what you can afford, and what you expect him or her to pay for.
Want to see how your children’s attitude changes when they are spending their own money? Try this:
Next time you go shopping, give the children $10 each to spend, but tell them you expect change back. You won’t get much back. On a subsequent visit, give them $10 again. But this time, tell them they can keep the change. You will be amazed by how much less they spend.
HELP FOR TEACHING CHILDREN ABOUT MONEY
Financial Peace Jr., by nationally syndicated talk radio money guru Dave Ramsey, teaches children ages 3 to 12 how to earn, spend, save, and give their money. Available online at www.daveramsey.com, or (888) 227-3223; $19.95.
Jumpstart Coalition for Personal Financial Literacy, online at www.jumpstart.org, (888) 45-EDUCATE, allows you to take a “reality check” quiz to determine how much money you would have to make to support the lifestyle you want.
Money Savvy Pig, a bank that helps children to save and spend wisely. It costs about $15 and is available online at www.moneysavvygeneration.com or (866) 390-5959.