Debilitating consumer debt and bankruptcyare now common everyday occurrences inAmerica, and that makes it all the more surprisingthat children don't get money managementtraining in school. Until that changes, it's up to youto teach them. As you plan for your family's future,it makes sense to get specific about the financial valuesyou want to teach your child. The following aresome initial steps to help you teach your kids thevalue of money:
•Determine the right allowance. As early askindergarten or first grade, your kid is going to haveto start paying for things, even if it's just one containerof milk a day. You need to understand how muchmoney your child will need for basic school expenses.Decide whether they need to earn an amount forextras, such as toys and candy, then stress why workingfor treats is important.
•Take a look in the mirror. Do you drive a biggercar than you can afford? Every time you go to thestore, do you pull out a credit card to pay? Do youand your spouse fight openly about money at home?Your child hears all of this. Children learn all-importantlessons by example, so make sure the moneymessages you're sending are the right ones.
•Buy a piggy bank. Young children need thistried-and-true symbol of saving. They need to knowthere's a place to put the pocket change they don'tspend and that they are free to tap into it only toaccomplish a goal that the both of you discuss. Thisisn't about buying stuff, it's about setting goals.
•Don't miss an opportunity for a lesson.Watch your child's behavior to see what they want tobuy. Ask them how they plan to pay for things. Thisis your window on whether your money messagesare getting through. "I want"and "I need"arealways opportunities for you to teach. Some prettyserious money issues can come out of the mouths ofbabes, so listen for them.
•Have them open a savings account. Open asavings account for your child. Make sure they keeptheir bankbook or monthly statements in a safeplace, and make sure they get in the habit of depositingfunds at least once a month. You might also considermutual funds geared toward children.
•Handle money mistakes carefully. A child isgoing to make mistakes with money—they'll lose it,spend it on the wrong things, or possibly give it awayto others. A child needs to be taught sense and cautionwith money, but not fear.
•Adjust the conversation as they age. Aschildren become teens, they want more autonomywith their spending. You need to match that trustwith accountability. If you deposit money in anaccount for them to spend on essentials and treats,talk about what you are willing to pay for in additionand make those agreements ironclad. Kids willalways come to you with their hand out, but theyneed to know when you'll say "No."
This article has been produced by the Financial Planning Association (www.fpanet.org), the membership organization for the financial planning community.