Journal Entry

Talking to kids about money

Kids and money

Deep down, every good parent knows that responsible money management is among the most valuable skills we can impart on our children. Personal bankruptcies are on the rise; our culture itself is dependent on the notion that making major purchases on credit, rather than saving up and paying cash, is not only good for us, but for the economy. But for many, daily parenting battles seem challenging enough without adding dollars and cents to the mix. Who needs something else to fight about? Fortunately, unlike a lot of other parenting issues, the problem of money can be broken down into easy-to-manage parts.

Earning

While some believe that giving kids a weekly allowance–free from obligation on the child’s part–is perfectly acceptable, I have always been a strong believer in awarding allowance only in return for chores. Older children should be encouraged to get jobs, be they at the local McDonald’s or raking the neighbor’s leaves. Money represents work. Every dollar passing though every cash register in the country was earned by someone. The sooner kids realize this, the easier it will be to teach them about financial responsibility.

Saving

Saving money can seem hard, but there are ways to make it simpler. Make it a rule that whenever your child wants to buy something they must “pay themselves” fifty percent of the total cost of the item. For example, if your child wants to buy a toy that costs $10, she must save up $15 and put the remaining $5 in her savings. This way a child’s savings will never run dry. And hopefully, if it becomes a habit, it will serve them well in adulthood.

Whether children should save money in a bank account, someplace safe at home or even in the care of Mom or Dad should be an individual parenting decision. It depends greatly on the age of the child and the child’s maturity level. Most parents know what is best for their kids and when.

Spending

Here again is an excellent opportunity for good parenting: teach children to recognize the difference between when they really want something and the urge to buy something on impulse. Retailers are masters at making us open up our wallets for things we don’t really want or need. Parents should explain how store displays are designed for this purpose. If kids believe they are being tricked, they are more likely to think about their own buying behavior. Have kids take a good look at items they’ve seen advertised on TV as well. Many times things are not what they’re made out to be. Kids who realize this are likely to make smarter spending choices.

Talking

Possibly the number one parenting choice we can make regarding money is simply to talk about it. Don’t allow your kids to believe that money comes from an ATM. Take the opportunities provided by life and use them: talk about the stock report on the news, explain what interest rates are, or what it means when something’s “on sale”. Even young children can grasp these concepts when presented in a simple way. The less of a mystery money seems, the smarter kids’ choices will be. And in the process parents own choices may improve as well.