|
|
 |
|
7 Ways To Raise Kids Who Can Hold Onto Money |
|
Written by Terry Savage
|
|
What is the American Dream? One part is the hope of making a good life for yourself.
Another big part is this: To create a better life for your children.
That's what motivated the generation born in the Great Depression to
scrimp and save to send their kids - the baby boomers -- to college.
But the baby boomers have morphed the dream in a different direction --
determined that their children would not know the privation and
struggles they'd witnessed.
And so today we have about 42% of our population under the age of 30 -
and, with it, a generation of middle-income children who have grown up
with an enormous sense of entitlement. As a baby-boomer parent, I
participated in this reshaping of the dream, too, without realizing
that I might be denying my son the challenge of achieving goals and the
joy of surmounting obstacles -- experiences that have motivated my life.
And what this means is that a lot of kids just don't get it with money.
Respect for money
So what can we, as parents, do to create money-smart and motivated
kids? We can start by helping our kids sort out and understand the
blizzard of messages we send to our children. Two-year-olds recognize
television commercials and demand the toys and snack foods that are
cleverly marketed to them. Toddlers in a grocery cart watch while Mom
inserts a piece of plastic -- and money spurts out! Late-night
arguments between parents over unpaid bills send strange signals to
children.
We can try to find new ways to celebrate old-fashioned money virtues.
If parents treat money with respect, watchful young eyes learn. I still
remember mom forcing me to pick up a nickel I'd dropped in a muddy
gutter along a sidewalk.
You teach kids about money through such tools as allowances, letting
kids work for money and introducing them to investing. But as you do
those things, keep two key points in mind:
* Your children are individuals. Some will grasp the
lessons, others won't. You'll just have to accept that the motivational
techniques that work with one child may not have much effect on
another. Still, that's no reason not to give it a try.
* As parents, remember: you're in control. It's a truth
that's not always obvious, says Janet Bodnar, author of "Kiplinger's
Dollars & Sense For Kids," one of my favorite books on money and
kids. "Don't fall into the parent trap of giving in to your kids out of
fear, guilt or pure indulgence," she warns. "Every family needs at
least one adult, and that person should be you!"
Key strategies
Still, the first step in raising money-smart kids is your own
determination to make it an important issue. Don't ramble on about when
you were young. Instead, talk about money. Offer real-life lessons. And
consistently set a good example with your own actions. Here are my
seven strategies for making kids good with money:
1. Teach even the youngest children the difference between needs and wants.
Children between the ages of 4 and 12 directly influence an estimated
$187 billion in adult purchases every year, from food and clothing to
sports equipment and computer, Bodnar says. Experts estimate teenagers
spend an average of $85 a week of their own money.
Explain early on that some things are just too expensive -- or that
some purchases have to wait until we save up for them. This helps
develop the independence and self-confidence that children will need
later on to say "no" -- whether to smoking or drugs or having the
latest fashions.
2. Let your children make money decisions from an early age.
In many families, an allowance is merely a way of transferring enough
cash to avoid daily handouts. But if you talk with your child and work
out a budget based on necessities, such as school lunch money and bus
fare (if that applies), you can build in enough extra for some
discretionary choices.
Depending on the age, a few extra dollars of allowance each week can
let the child learn the benefit of saving for a big purchase vs.
spending on small stuff today. For more on allowance, check MSN Money's
Quick Reference section on kids and allowances.
How kids handle allowances is another important lesson. A wealthy
father told me he gives allowances to his children each week, making
sure to use dollar bills, quarters, dimes and nickels to make up the
total for reach child. Each child must divide the money into three
zip-lock baggies -- one for saving, one for spending and one to take to
church for charity. Once a month, the family goes to the bank to
deposit the money in the "savings baggie."
3. Give your child an attractive alternative to spending...and motivation to save!
Many banks still offer accounts specifically aimed at children, letting
them add a few dollars at a time and even stamping the amount in a
passbook. Explain that the bank pays you "rent" -- called interest --
to use the money. The interest builds up and earns more interest. If
you'll jumpstart the account with a $100 deposit and let the child add
to it, the picture becomes clearer. My son had a savings account from
the time he could reach the bank teller's counter. At age 12, he
noticed that he could get a higher rate at a different bank. He moved
his money.
If your bank doesn't offer these services, check out the Young
Americans Education Foundation & Bank, which offers not only
children's banking, but also an entire educational program.
One good way to motivate your child to save is to match his or her
savings -- dollar for dollar, or penny for penny. This works well with
young children and can be an especially good motivator for the teen who
gets that first paying job. One part of your older teen's work
motivation might be to open a Roth IRA, with you promising to match the
savings 2-for-1 -- up to the possible $2,000 annual contribution, if he
earns that much. This has a double bonus: Not only does the Roth
concept teach the savings lesson, but it starts building real wealth
tax-free.
A note: Watch a new site, 401kidz.com, which promises to offer kids,
parents, teachers and sponsors new tools and games to learn about
managing their money. The site includes as partners the Department of
Education's Save for America program and ShareBuilder.com, the website
that promotes and facilitates stock investing by small investors.
4. Make sure your child understands the connection between work, paychecks and taxes.
While I don't advocate sharing the entire family budget with your
children, it's never too early for them to watch you use your Microsoft
Money software to sort out your spending and investment decisions.
(Editor's note: Microsoft owns and publishes MSN Money.) Let them know
that the hours you work translate into dollars you spend. And be sure
to give them some idea that the government takes about one-third of
your earnings in taxes.
5. Never give up on trying to teach kids about the cost of credit.
Your kids are bombarded with credit messages -- and may even receive
credit card solicitations in the mail. (The most horrifying financial
message I've seen on the subject occurred a few weeks ago when I saw a
darling 2-year-old girl playing "dress-up" with her little purse, made
by a well-known toy manufacturer. Part of the outfit included a tiny
"kids credit card!")
How do you teach the concept of the maintaining good credit? You can
get your child a plain debit card and see what happens. You can also
get a "secured" card, which is a debit card that you can keep an eye
on. Two versions of cards with parental involvement are Visa Buxx,
offered by Visa, and PocketCard. Not only do they let parents track
spending, but they're also reloadable online.
Unfortunately, the one lesson these cards don't teach is the importance of paying the bill each month.
Perhaps the best credit lesson is a guessing game: How long will it
take you to pay back a $2,000 charge, if you make only minimum monthly
payments and pay a finance charge of 19.8 percent?
Answer: as long as 31 years. Along the way, you'll pay $8,200 in finance charges for today's purchase.
6. When the age is right, encourage your child to get some work experience.
It can be walking the neighbor's dog or baby-sitting and later moving
on to bagging groceries or working in a restaurant. By the time your
child receives a paycheck, minus taxes, the concept of spendable income
vs. savings will become very real.
7. Teach your child about investments.
There's no better teacher than experience. So whether you purchase a
mutual fund or an individual stock, talk to your child about the
connection between being a customer and being a shareholder. Mutual
funds such as the Liberty Young Investor (SRYIX) send interesting
materials to help with this process. And Web sites such as
www.BuyandHold.com make it easy and affordable to purchase just a few
shares of stock.
While it's important to explain the practical aspects of money
management -- saving vs. spending, making smart purchases, and the cost
of credit -- smart money management helps your child set lifetime
goals. As Robert Kiyosaki, author of the excellent "Rich Kid, Smart
Kid," argues it's not the power of money, but the power over money that
makes people rich.
While you may not agree with the book's conclusions, and the advice may
not be appropriate for children with no desire, you should have no
problem accepting the concept that belief in yourself is the largest
component of ultimate financial success. And, Kiyosaki says, that's the
most powerful financial gift a parent can make to a child.
We're fortunate to live in a society that offers opportunities for
unlimited financial success. Let's make sure our children are prepared.
Terry Savage is the Chicago Sun-Times personal finance columnist, and a regular commentator on PBS' Nightly Business Report.
|
|
 |
 |
|
|
|
LATEST ARTICLES ON FATHERVILLE |
|
|
|
MOST RECENT FORUM POSTINGS |
|
|
|
MOST READ ARTICLES ON FATHERVILLE |
|
|
|
|
|
|
|
