When’s the last time you had a serious conversation with your child about money? For most of us, such conversations take the form of “no, we can’t afford to be buying all these things,” which is usually a pretty easy conversation to have. But what happens when your child actually comes into some money of their own – whether it’s from a birthday, holiday, allowance, or part time work? Can they count on you to help them make sense of spending it wisely and productively? Instilling good spending habits early on can really pay off – so here’s some advice from the professionals on how to get that done.
Give an allowance: Author and parent educator, Vicki Hoefle, recommends you start providing your children with an allowance as early as age two. The belief is that if you can trust your child not to put the money in their mouth, they’re ready to learn how to manage and spend it as well. This works by providing youngsters with money to manage, but also money to “lose.” “Give them a small allowance early and let them spend it away,” she says. “They’ll soon see the pains of losing what they have and the satisfaction of saving patiently for what they really want.” Hoefle also thinks having a child learn the importance of earning “one’s keep” is equally important, and suggests you cut allowances in half at age 12, in favor of outside the home work, and eliminate allowances altogether once your child reaches the age where part-time work becomes available.
Use everyday events as an opportunity to teach: Jayne Pearl, author of the book “Kids and Money: Giving Them The Savvy to Succeed Financially” likes the idea of teaching kids about money all day, every day. Her ideas center around leveraging trips to the store, the bank and the ATM to routinely talk about money with kids. Likewise, when playing with younger kids at home, integrate real money into games involving imaginary restaurants and stores, for example. Then, when they’re older, take them to the bank to set up an account so they have a place to put their money. Pearl also likes the idea of involving teenagers in watching a stock portfolio grow as well, learning about interest and using pre-loaded “value-cards” for budgeting and charitable gifts.
Demonstrate the value of saving: With most Americans in possession of more debt that savings, Beth Kobliner, author of the uber-successful personal finance book “Get a Financial Life,” believes we really need to start teaching the next generation the value of a good piggy bank. One of Kobliner’s popular ideas works like this: “create three jars – each labeled “Saving,” “Spending” or “Sharing.” Every time your child receives money, whether for doing chores, or from a birthday, divide the money equally among the jars. Have him or her use the spending jar for small purchases, like candy or stickers. Money in the sharing jar can go to someone you know who needs it or be used to donate to a friend’s cause. The saving jar should be for more expensive items.” Kobliner has been at this a while, so for more tips about working with kids in every age group check out her interview in Forbes magazine.
Teaching good spending and saving habits is something you want your kids to embrace early in life. What little you dish out in allowance money can really make a difference in their understanding of money, and saving can allow them to feel empowered, even as a little person. For more on this subject check out Parenting Magazine’s rather large list of articles about kids and money.