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You and Your Money

PERSONAL FINANCE: Teaching Children About Money : Your Kids vs. Your Wallet

How many times have you wondered whether your children think money does indeed grow on trees? It probably seems like every time you turn around your wallet is being attacked by the “gimme’s”. If you honestly examine your spending habits (and those of your kids), you may realize that you have not given them any reason believe that you don’t have a money tree.

In truth, we all want things and kids are no different. How easy it is to whip out the credit card(s) and instantly gratify our desires. What message are we sending our kids?

What follows is a collection of ideas about how we can instill in our children a better understanding of money and how it works.

Establish a Savings Account and a Plan

Every child should have his own savings account even if it is just a piggy bank. Whether your child receives an allowance or works a job, establishing a savings plan is a must. Encourage your child to donate a certain amount to charity (to help them develop a lifelong habit of helping others). Then establish a certain percentage for long-term savings (such as college) and short-term savings (such as clothes, toys, etc.).

Saving for both long- and short-term goals will build a child’s confidence in her ability to save and helps her learn delayed gratification. And, once the savings goal has been met, she may even discover that the money would be better spent for something else.

Finally, allot a small percentage for discretionary spending. You might find that the following percentages work well: 10% charity, 50% long-term savings, 30% short-term savings, 10% spending. Find a balance that works well for you.

Hold a Bill-Paying Night

This is a great activity to show your school-age children where your money goes. You might even learn a bit yourself.

First, assemble a list of your monthly and/or weekly expenses and their amounts. The amounts don’t have to be exact. Write the expenses and their amounts on separate slips of paper. Then, add up your monthly income and use pretend money (Monopoly® money or make your own) to represent the amount.

Next, take the expense slips and give them to your children. Have them come to you and “collect their bill” one expense at a time. This is an excellent visual representation of how quickly the paychecks get depleted!

Afterward, discuss ways you can cut your spending to help stretch the paychecks for things that are really important. You might be really surprised at your children’s input.

Encourage Them to Work

Even young children can do extra chores around the house or yard to earn extra money. Teenagers should be encouraged to get a job. Working helps children understand that money comes at a cost, thus dispelling the money-tree notion. Working also improves their self-esteem and you can teach them to take pride in their work.

Have a Family Savings Fund

Save as a family for large expenses like vacations. Set up a jar or box for keeping the money in and post a chart tracking your progress where family members can be reminded.

Establish Spending Limits

Establish spending limits for items like clothes and shoes. Be willing to pay so much for something, but your child must make up the difference with his own funds if he goes over the allotted amount. For example, he may want a $100 pair of shoes. You agree to pay what you normally pay (say $40) and he has to pay the rest. New school clothes take a huge bite out of the family budget; why not enlist the aid of your kids? Agree to only pay for so much and then leave the buying up to them (within reason, of course). They may surprise you with what they are able to do with their money. Encourage them to watch for sales in order to maximize their dollars.

Take Your Child Grocery Shopping

If your child can run a calculator, she can help you grocery shop. Give her a fixed amount that you will spend on groceries and have her subtract each item from the total as you shop. Teach her to compare food labels and get the best product for the money. Ask for her input about how you can reduce your overall grocery bill.

There are many ways to teach your children the value of money and help them build valuable skills. If you don’t teach them, who will? So take the opportunity to call a cease-fire in the battle between your kids and your wallet and work out a compromise in which both sides win.