Teaching Children About Money

Money and Children: What To Teach Your Child

Parenting children to learn to manage money is important. Too many parents avoid this area of teaching until the child is an adult; 18 or older.

When we wait to teach children about money, and how to manage it until they’re adults, they learn primarily as a result of their own successes and failures. Some high schools offer “Personal Finance” classes. The majority of high school students, however, do not select these types of courses because they interfere with other required math classes for college preparation. Many parents report that their money management skills are often not what they’d like them to be or our finances are so complex that how we handle our money doesn’t mean much to a child.

Many children will learn to manage their money through their own personal experiences and the guidance you, as parents, may give them. In other words, children learn from trial and error. Below are some parenting tips that you may want to consider to help you child learn to manage his or her money.

Benefits of an allowance

· Having a regular amount of their own income is the only way kids can learn to manage money.

· Children need to be able to make mistakes when the cost is minimal.

Knowing the limit of available funds forces kids to:

· To think about how much things costs

· To make spending choices between the many things that they may want

• They have more appreciation for the things they buy when they use their own money

When should I begin providing an allowance?

Once your child begins to show an interest in money and asks you for money to buy something that the child wants- start talking about money. It’s time to teach the concepts of:

• What money is, and is not
• How money works
• How money can be good
• How money can be misused
• How people can earn money
• The importance of spending
• The importance of saving

When a child is ready to learn the fact that money can be exchanged for goods, they are ready to start learning the basics of money management. For many children, this may occur as young as three or four.

How much should the allowance be?

There are plenty of diverse opinions on how much money should be given as an allowance for children. Some child development behavioral experts say a dollar should be given for each year of age. Others would suggest you match the amount their friends get. Neither amount may be appropriate.

When coming up with the amount, consider the following:

Determine how much money you already give them. If your child does not get an allowance, you are managing their money for them by deciding what they will buy and what they will do. Their role is salesperson and manipulator. Consider letting the child begin to manage his own money. Refrain from doing all the work. Simple total up the amount you are giving them now (through you) and provide that amount as an allowance. You’ll save money and avoid some of battles along the way.

Make a list of what they are expected to pay for with their allowance. Once you have the amount, sit down with your child and make a list of everything they are expected to pay for.

Keep in mind the fact that kids have three uses for their money - spending, saving and sharing. Consider all three areas when you are coming up with the amount. In addition to setting the allowance, this process puts an end to the constant requests to buy this and that and to give them money to do whatever their hearts desire.

Should Allowances be tied To Chores?

Most parents believe that their child has a certain amount of responsibility around the house. Responsibilities, however, have very little to do with allowances. In fact, if those responsibilities are not fulfilled, the loss of privileges would probably be more appropriate than the loss of allowances.

How can a child manage their money if they don’t know how much they will be getting on a regular basis? Consider this:
If a child does not need their allowance that week, is it acceptable not to do the chores? And, do we really want your children to ask, “How much?” every time a parent ask them to do something around the house?
Money is an important concept to teach. Yes, many schools are beginning or continuing to teach students the importance of having and spending money. Is your school teaching what you want your child to learn and know about money?

Debt and Family Stress

Is Your Family Debt Causing Family Stress?

What Parents Can Do

Over the years, hundreds of students have shared with me that their parents are fighting, not speaking to each other, or are feeling stressed due to financial pressure. Common themes centered on a parent losing his or her job, not being able to afford “what others have, and battles among siblings who have to share “family gifts.” For years, many parenting authors shared their concerns and made claims that financial pressure was a leading cause of divorce in the United Stated. The good news is that many of these claims are no longer being made without proof.

Over the past five years, tens of thousands of Websites have been developed to assist families with financial advice to reduce not only debt, but the stress that comes with the debt. Most of these sites, however, do not provide resources, strategies or techniques for parents to utilize in helping their child and themselves reduce the emotional stressed caused by financial difficulties. To reduce family stress, help your child become more accountable with his or her money and become a role model in your home with financial matters, parents may apply some of the strategies listed below.

Have a discussion with your children at an early age (five or above) to let them know that items cost money. Have this type of discussion several times a year. Don’t lecture, but provide information in a learning atmosphere. Share (at an age appropriate level) what you, as a parent do for a job or how you make money to buy things. Don’t allow your child to learn that materials goods come at no cost.

Show your child how you pay your bills; what it cost to heat the home, pay for car repairs and buy groceries. It’s not appropriate to share your private computer accounts, codes and passwords for bank accounts. It is important to let the child know that you have a system in place to pay for things that your family needs.

Hold a discussion with your children that centers on the following:

Family/Individual Needs: Food, shelter, clothes, transportation (car), communication (phone), etc. vs.

Family/Individual Wants: TV, cell phone, toys, games, trips, jewelry etc.

Let your children know that you love them; especially during stressful times. Spent time talking, doing activities that don’t cost anything (play cards, games, read, take a walk etc.). Having fun does not have to cost a lot of money. Saying, “I love you” is free!

Jan Andersen, associate professor at CSU Sacramento, research indicated that financial pressure was not a leading cause of divorce in the U.S., but is often ranked four or fifth in that category (MSN, Money).