Your Kids and Money

As a responsible parent, it is important to teach your kids about the wonders and pitfalls of money management.  But if you are in financial trouble yourself, how do you teach your kids anything that will have meaning for them?  Remember, just because you are having temporary financial troubles, does not mean that you don’t know what needs to be done.  Teaching them will also remind you of the best ways to handle money issues.  Here are some ideas to help:

It’s The Little Things.  When kids get into the first grade, they are introduced to coins.  They are taught their amounts, how to count coins, and what combinations of coins equal a dollar.   Addition and subtraction are also studied, and the beginnings of multiplication and division are explored.  But learning these things doesn’t actually help them UNDERSTAND money, and its uses.  You can help.  By giving them “play money”, and talking to them each time you take them to the grocery or other store about how to decide which items they want and how much money they have to spend on those items, sets the pace.  Just like in every-day life for us grownups, they will have to put things back and make good decisions.  Be prepared for some tears and upsets, but it is all done in the spirit of learning.  Encourage the kids to use their play money at home playing “store” as well.

Allowances.  A weekly allowance, especially for doing chores, is a great way to get kids into the spirit of budgeting and saving.  An allowance of $5.00 per week, as an example, for doing a series of chores to help out around the house provides a rich medium for kids to learn that there is “no free lunch” in life.  No matter what “chores” you give them to do, it is important to keep a chart of their progress, and give out “stars” for completing tasks.  Have a savings “piggy bank” of any type where kids need to deposit their allowance.  It is important that they cannot retrieve it at will, so they get into the habit of socking it away for the future.  Be sure to give them the allowance in small denominations so they have to count it out to be sure of how much they have.  Keep a chart with them of their savings, just like a passbook at the bank, so they can keep track of their funds.  Saving up for a big purchase can be an exciting lesson.

Needs Versus Wants.  Kids, like many adults, want everything they see.  All you have to do to confirm this is to spend an hour watching TV with them.  Almost every commercial aimed at kids causes them to say “I want that”.  It is the same in life.  But we can’t always afford what we want.  Hopefully, we can afford our “needs”.  Teaching kids about the necessities is a hard lesson for them…remember, they have been given everything up to this point with no consequences, so this is a very hard thing to grasp.  Needs include:  water, food, shelter, clothing.  Kids will think that the fifth need is “toys”.  But you can explain that one!  School supplies, lunch money, participation in after-school sports, ballet lessons…these are all needs that can be met after the basic needs are met.  Consider “matching” what they save in some way, such as they save $20, and you give them $5 to add to it.  In this way, a child may save $300 in a year.

Teenagers And Money.  Today, teenagers want everything.  A cell phone, an IPad, an IPod, GameBoy, WII, concerts, and internet games.  Money is a part of that.   They also want the clothes and accessories that help them feel a part of the group, and cash to spend extemporaneously when they are with their friends.  Today’s harried and hectic parents just want to throw cash at their kids and move on.  But this practice can lead to uncontrolled spending, and some startling bills.  Giving a teenager a prepaid card is a good way to limit their expenses.  Sit down with them and make a budget for a month, and let them see what kinds of things can be purchased within their budget.  Are you going to give them $50 or $300 each month?  What will you allow them to use the card for, versus those things that you pay extra for on their behalf (like concert tickets).  Make sure that they understand that a prepaid card is an advance on their allowance, and there are chores that must be performed in order to earn those deposits.  If you skip this step and do not make them accountable, there will be war at home.  Of course there will always be the un-planned-for expense.  Just like for us parents.  But these can be minimized by sitting down with your teenager and discussing the upcoming month’s activities.  At the end of the month, when the statement comes from the prepaid card, be sure to sit down with your teenager and go over the list, so he/she can learn from the experience.

What About the College-Aged Kid?  When a child is in college, the parent loses much more control over the spending issues…especially if the college student is motivated to earn their own money by working part time.  If a parent has done a good job with the teenaged phase, then this will not be so hard.  A prepaid card can also work in this situation, but it is no longer an “allowance” unless they are living at home.  If you are going to provide a credit card to your college student, be sure to team them responsible credit card use.  Although college kids have opportunities to open their own credit cards, make an agreement with them to assist them by having access to the online account so you can keep tabs on the spending and catch problems before they become catastrophes.  If your college student has activated his own cards without you co-signing for them, then be sure that he/she gets a regular monthly credit report from a service.  Sit down at least once per quarter and show them the effects of their financial choices.

Protecting Your Child’s Credit.  “Monitor your mail, and be suspicious if materials such as offers for pre-approved credit cards show up in your child’s name.  Suspicious credit documents could be cause for alarm.  Monitor your child’s online activity, particularly if your child is frequenting social networking sites and/or chat rooms, and making online purchases.  Educate your child about the importance of keeping personal information, such as last name, address, etc., private when sharing information online.  Educate your child about unsolicited email scams – “phishing” emails – that ask for personal information.  Be sure that your child knows to delete fraudulent emails of this sort.  Don’t allow children to carry their Social Security cards in their wallet or backpack, and don’t carry them in yours.  Instead, retain ownership of these cards, and keep them in a safe place.”…Experian Credit Education