Don't leave your children to fend for themselves in a debt-laden society. Money management needs to be learned and practiced. Teaching children about money management is essential to their success as consumers, in business and as adults. There is no perfect way of teaching children about money, but some methods are better than others.
Released July 20, 2007
LOGAN, Utah -- Discussing finances with children is sometimes difficult and 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. Money management is something that must be learned and practiced.
Teaching children about money management is essential to their success as consumers, in business and as adults. There is no perfect way of teaching children about money, but some methods are better than others. Consider teaching the following in everyday home life.
- Discuss the difference between needs and wants. As basic as it sounds, many financial difficulties could be avoided if people understood that 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 a toy or other 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. A young teenager recently expressed excitement about finally being able to purchase a trampoline. She and her sibling saved their money for several years so they could buy it. This is an excellent example of setting a financial goal, working hard and reaching it.
- Include your children in the process of making a monthly family budget. List your income. Then ask children to list expenses, including rent or mortgage, food, insurance, car payments and maintenance, clothing and so on. Look over bank or credit card statements to see how much you spent on these in the past. Have children find the difference between income and expenses. This activity can effectively prepare children for building their own budget.
- 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. If children want to buy something not planned in the family budget, give them the opportunity to buy it or save for it with their allowance. Remember to explain that they can have the item if they buy it with their own money, but that the money will not be available for something else they may want later. 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 cries for more money.
- Resist the urge to rescue your children. If they bitterly complain or cry that they want something, stick to what you have stated about wants verses needs. Keep reminding your children that they can use their own allowance, earn extra money and save to buy what they want. 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 into savings. Be sure there is a goal to work toward, such as saving for a trip to Disneyland, a new bike, a college education or a new video game. Help children estimate how much their goal will cost and decide how much 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. Point out ways to maximize your dollar, such as reading price labels to determine price per ounce or using ads and coupons to plan your menu. 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, parking attendants, etc. 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 — do your best to practice what you preach.
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http://extension.usu.edu/htm/news/articleID=2204
Sources: Melanie D. Jewkes
Julene Reese, (435) 797-0810, julener@ext.usu.edu
