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Money Mentoring

With many children having received money for the holidays, now would be a good time to start teaching them how to use it wisely and efficiently.

Public-school students in many states are getting a crash course in personal finance with local banks and other major corporations lining up to help teach them by developing tools and curriculums to offer free to schools, in return for carrying their corporate logos. Even the National Football League has gotten into the game, partnering with the credit-card-giant Visa, to offer a computer question-and-answer game called Financial Football at www.practicalmoneyskills.com.

The level of financial knowledge among many young people is dismal, says a spokesman for the Washington-based Jump Start Coalition for Personal Financial Literacy, noting that people under age 25 are one of the fastest growing groups of bankruptcy filers, and individuals between the ages of 18 and 24 have seen their credit-card debt increase more than 100 percent in the past decade.

Spending wisely
You can start discussing money when your children are still quite little, even as young as age 3. Start by demonstrating that money is used as a trading tool for items of value or for services.

Show how money works by allowing the child to make his or her own purchase. Now is also a good time to teach children how to divide available funds into different categories, such as saving, sharing, and spending.

If your child does not have an allowance, think about starting one. How much? It depends on the child’s level of development, what you expect him or her to pay for, and what you can afford. Only when children have their own money to manage can they begin to put your lessons into practice.

Saving wisely
Just as important as learning to spend money wisely is learning to save. In the beginning, a very young child might save money in a piggy bank, but as soon as the child is old enough, take him or her to the bank to set up a savings account. Ask a bank representative if there are lower minimum deposits, if fees are waived for children, and how often interest is paid. Interest payments are important, as they teach your child that the money saved is busy earning interest.

Point out to the child that larger amounts of savings earn more interest and that some sources pay more than others. For example, some Internet banks pay 5 percent on passbook savings accounts while local and regional banks are paying 5 percent on short-term certificates of deposit.Young Americans Bank, www.theyoungamericans.org, owned by the nonprofit Young Americans Education Foundation, issues banking products to customers age 21 and younger, including a credit card with a $100 limit.

Family affair finances
Grandparents can be financial mentors. Peggy Houser, co-author of How to Teach Children About Money, suggests having grandkids set financial goals, such as an expensive toy, and then show how to save a percentage of their allowance each week to achieve their goal.

As your child grows up, gradually introduce him or her to a variety of investments, such as stocks, bonds, and mutual funds. Make it a family game, with everyone picking a stock for a company with which they are familiar, such as a fast-food chain or a maker of sneakers. Give out play money and track the stocks for three months. You may wish to check out Oneshare.com, through which you can buy a single share of stock. The company also offers OneShare Kids Club designed especially for babies, young children, and teens, which includes projects and guides to investing with membership.

Parents can join with grandparents in encouraging schools to begin or enhance financial literacy programs at younger ages. But experts are divided over whether educational programs alone can influence young people’s spending and investing behavior.

What you need to teach your child is not what to do with his or her life, talents, or money, but how to make choices, good decisions outside your supervision. Each family has its own set of values and opportunities, so select the financial lessons you want to share, and help set your child on the path to future financial security.



KID’S FINANCIAL EDUCATION RESOURCES

There’s plenty of help available for children and their parents wanting to learn about money:

www.lifeadvice.com or (800) 638-5433: for a free pamphlet from MetLife, Helping Your Child Understand Money

www.kidsbank.com: shows where money comes from and how a bank operates

www.themint.org: Northwestern Mutual Foundation’s financial education site to help children decide how to budget basic expenses

www.practicalmoneyskills.com: Visa offers free teaching materials plus the Visa Buxx prepaid credit card

www.moneyinstructor.com: walks through basics like money-market accounts and check writing

www.ingdirect.com or (888) 464-0727: talk to a real person about high-yielding Orange saving accounts or certificates of deposit

www.stockmarketgame.org or www.streetsage.com: about investing in the stock market

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