Posted by: Dennis Hinkamp on Apr 2, 2009
Teaching Kids Money Management
CAN YOU SHARE TIPS FOR TEACHING CHILDREN ABOUT MONEY MANAGEMENT?
Answer by: Melanie D. Jewkes, Utah State University Extension family and consumer sciences agent, Duchesne County
Discussing finances with children is too often neglected, leaving children to fend for themselves in a debt-laden society. Few people will suddenly know how to make a budget when their first paycheck arrives. There is no perfect way of teaching children about money, but some methods are better than others. Consider teaching the following concepts at home.
* Discuss the difference between needs and wants. Many financial difficulties could be avoided if people understood it is impossible to have everything you want, and that some things are more important than others. Teach your children how to prioritize.
* Help children understand there is no such thing as a free lunch. If they want to purchase an item, help them earn and save money to purchase it without going into debt. Teach children the value of working for money, whether by babysitting, taking a paper route or by doing extra chores around the house.
* Include your children in the process of making a monthly family budget. Have children find the difference between income and expenses. This activity can effectively prepare children for building their own budget.
* Involve your children in decisions regarding finances, especially in these rough economic times. Discuss your situation, including how and why there are tough decisions to make, and what you have decided is the best plan for your family. Few people will escape some type of financial hardship in their lifetime, and this is a great time to instill problem-solving skills in children to better equip them to handle or prevent a similar situation in their future.
* Give children a personal allowance, whether or not it’s tied to chores. An allowance gives them an opportunity to manage their own sum of money, no matter how small. It may take a while for a child to understand that once the money is spent, it is gone. But they will eventually learn — if you don’t give into their cries for more money.
* Resist the urge to rescue your children. Give your children advice, but allow them to make their own decisions, good or bad. Children will learn the most from personal experience, and likely it will be from mistakes.
* Saving is an important habit to begin early — early in life and early in a budget. Teach your children to pay themselves first. This means the first money to come out of a paycheck or allowance goes directly into savings. Be sure there is a goal to work toward. Help children estimate how much their goal will cost and how much they will need to save each month in order to reach it. Consider matching savings funds as an incentive.
* Mini money lessons can be included in day-to-day activities and errands and don’t need to take much time out of your schedule. Teach your children how to comparison shop at the grocery store. Use play money while making a budget so children can visually see how much money goes to expenses. Give your children the opportunity to hand money to cashiers, bank tellers or parking attendants. When writing checks, show your children how to carry a balance in the checkbook register. Share your bank, credit card and investment statements to teach them how interest works.
* Remember that children at different ages conceptualize money matters differently. Gear money lessons around what your child can understand, giving more responsibility to older children, but never underestimating younger children’s ability to observe your habits and attitudes toward money. Include all family members in financial affairs to give children a first-hand look at effective financial problem solving. Remember that one of the best ways to teach is by example, whether good or bad. Do your best to practice what you preach.
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Direct column topics to: Julene Reese, Utah State University Extension writer, Logan, Utah, 84322-4900; 435-797-0810; julener@ext.usu.edu
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