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VIDEOWhat's Money?
By
Scott Reeves Mar 05, 2008 1:35 pm
Defining value, earning and saving.
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But more than that, money is a tool that can be used to pursue your goals and secure your future. Used unwisely, money can make you a slave to debt.
“Money can give a sense of autonomy and individual control,” says Linda Leitz, founder of Pinnacle Financial Concepts in Colorado Springs, Colo. and author of The Ultimate Parenting Map to Money Smart Kids.
How you view and handle money reflects your values. That makes teaching kids about money a key opportunity to pass your core beliefs on to your children over the years. The basic point you want to make when introducing your kid to money is simple and often overlooked: With freedom comes responsibility.
As your kids grow up, give them more freedom to spend their money as they choose along with increased responsibilities and a higher level of accountability.
Start with an allowance and require your child to keep a record. It doesn’t have to be fancy – a sheet of loose-leaf paper with a red line drawn down the middle will do. Have your child label the left column “Allowance and Earnings” and title the right column “Spending.” Require your child to keep an accurate record of all expenditures, including date, amount and item purchased. (Note to doting parents: Save these sheets. The earnest first efforts will give you a smile when your child heads off to college.)
When your child has mastered the basics of keeping track of money, open the household account.
“Kids generally appreciate being included and treated as adults, or at least an older person,” says Leitz. “Tell your child that you’re about to discuss information that can’t be shared with anyone outside the family.”
Keep the discussion basic and remember that you’re underscoring the importance of accurate record-keeping – not revealing family financial secrets. There’s no need to discuss total family income. Just assure your child, especially when young, that the family financial situation is sound and there’s no need to sell the teddy bear or hock the bike to swing dinner.
It’s not necessary to open the family books every month – just show your child that the basic technique used to track allowance is employed to run the household, even if the information is posted on a computer-generated spreadsheet. Eventually, this will lead to a discussion about the need to save, the wise use of credit and how a mortgage works.
However, getting there will take some explaining. Remember to peg all discussions to the age of your child and keep this basic point in mind: An honest question deserves an honest answer. Add details as your child matures.
Introduce pre-schoolers to the look and feel of money. Let your child stack pennies and crumple a dollar bill. Point out the detail on the bill and George Washington’s picture. A stack of coins can easily be turned into a counting exercise.
Jason Goepfert, a Minyanville professor and founder of Sundial Capital Research, says he and his wife introduced their children, aged 4, 6 and 9, to “behavior bucks.” The kids get gold stars for helping out around the house or working with each other. Ten gold stars can be exchanged for a “behavior buck” that can be redeemed for staying up late, going to a movie or other kid stuff.
“We have a list of different rewards and how many ‘behavior bucks’ are required for each,” Goepfert says. “It’s simple and it works well. We print the bucks as we need them – just like the U.S. Treasury.”
When your child is old enough to understand, introduce the value of money. Make the dollar bill your baseline. Explain that coins are fractions of a dollar while $5, $10, $20 and $100 bills are multiples of a dollar. Then move on to how to make change, a skill that seems to elude many teenagers.
Keep it simple, but always make the connection between work and money. Explain to your child that you and your spouse go to the office five days a week to earn money to pay for household expenses. Add detail as your child matures. A detailed discussion of taxes probably can wait until your child’s first part-time job.
A child will gleefully exchange money for valuable things like toys or a purse. Coins and bills aren’t interesting to kids because you can’t do anything with them except trade ‘em for good stuff. So, underscore the connection between money and the labor it represents.
Start by linking money to small household tasks. Make it clear to your child that everyone pitches in around the house because that’s the way a family operates, but also say that you’ll pay a little extra for a bang-up job.
When your child is young, choose simple tasks such as emptying the wastebaskets. Don’t pay your kids to keep their rooms clean or to do well in school because paying for good behavior sends the wrong message.
When your children get older, make a list of household tasks and the price paid for each. Set performance standards and a deadline for completion for each job and let your kids bid for the work. This will allow your children to increase their weekly earnings if desired and will encourage them to shift the workload among themselves as needed to accommodate school activities. Make it clear that all tasks must be completed each week and it’s up to them to get the work done on time.
That builds responsibility, introduces the need for time management and establishes a link between work and money. Your children will quickly come to understand that money doesn’t drop from the sky, putting them light years ahead of friends whose parents buy them everything.
Click here for five things you can do to teach your kid about money.
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Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
