Teaching kids about money
The dos and don'ts of teaching kids money smarts
September 25, 2012 by Mark Dye
As a parent, I know it can be difficult to teach your kids about money. Not what each bill and coin is and the amount, but how to explain the importance of things like saving money (especially to kids with short attention spans).
Although thousands of words have been written on the subject, here are some simple and easy-to-follow dos and don'ts that I have found can help.
Do give your child an allowance—This is a matter of some debate, but I think it works well because it gives your child the chance to make choices about money, something that’s impossible if they don’t have any. Remember, though, that an allowance is a tool to teach children about money, not about chores; those should be considered a responsibility.
But don’t stick to the same allowance for years—Have a "review" every year (perhaps near a birthday) that allows them to negotiate a higher rate.
Do educate your child on the different forms money can take—Tell them about the different coins, dollars, debit cards, credit cards and even checks (if you still use them), and how each works.
But don’t wait—Research shows that the sooner children learn how to budget and save, the more likely they will retain those habits well into adulthood.
Do encourage teenagers to get a job—Earning money is the best way to teach its value, and it introduces kids to the "real world.” Plus, they can use the money to buy a car, pay for insurance, or even save for college.
But don't let them get a credit card—Having a trashed credit report before they turn 18 is not going to help them in life.
Do stress the savings—You could tell them they have to put aside a certain amount each week or month, and you could even match a portion of what they save (like when an employer matches funds in a retirement account).
But don't tell your child you don't have the money for something—This can cause a negative, or even spiteful, attitude toward money. Instead, say that the item has to be added to the budget and you’ll need to save up for it. This can also help avoid a "But I gotta have it now!" mentality.
Do guide them—And make sure to let them learn at their own pace; don’t pressure them.
But don’t control the process—They are going to make mistakes, but that's part of the learning process. It's much better to get those goofs out of the way now with a new bicycle, rather than later in life with a new car.
Through all of these steps, remember one important thing: Have fun! Who knows, you might also learn a little something in the process.
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