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Teaching your Kids Money Sense |
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Money doesn't grow on trees. How many of us heard that refrain from our
parents? Little did we know that one day we would be passing along our own money
management insights to our children. With a little forethought, those lessons
can help our kids be better prepared for a healthy financial
future.
Like most things in life, children learn about money by
observing their parents' money management habits. If we budget
our households wisely, set up a system for our children to earn money and place a
high value on our own savings, our children are more likely to manage their own
money well, too.
Because family finances are becoming more and more
complicated, even young children should learn something about money management.
In fact, the National Center of Financial Education advocates starting a child's
money education early, right after learning to count. Parents can start by
letting their children count the coins in their pockets. Stacking coins can help children begin to discern their
differences.
Next comes allowances. Most family economists and child
development experts believe that allowances geared to the age and needs of
children can help them learn to make decisions on how to manage money at an
early age. It's similar to learning to ride a bicycle. Giving children
allowances and letting them decide how they will spend the money is like letting
go of the seat.
Only after children learn how to spend
can they learn how to save. Experts advise parents to teach children the
"third-third-third" concept - one third for immediate urges, one third for
short-term savings for something extra and one third for long-term savings.
Often they will have to choose among many things they want.
That's where
the lessons of budgeting come into play. By the time kids hit their teens, they
should have experience with budgeting their money. Of course, parents can help
them by setting limits and emphasizing value.
For instance, when shopping
with your teen for a new pair of jeans, you head for the sales rack of $45
models, but your teen steers you toward the $60 designer labels. In such cases,
it helps to have a predetermined understanding about what you are willing to
spend on jeans. Then stick with it. Present your teen with the option of adding
to your $45 the extra amount it takes to make the purchase. If it takes your
teen a few extra weeks of work to purchase those jeans, your teen will have
learned an important lesson about the value of money.
Money doesn't grow
on trees. But the sooner children learn where it does come from, the sooner they
will learn to appreciate the fruits of labor and sacrifice.
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