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?

Holiday Gifts With Meaning

Featured Author, Robin F. Goodman, Ph.D.

For parents, the joys of the winter holidays are often tempered by the commercial focus of the season, and gift giving is complicated by well-intentioned or guilty feelings. Children's catalogs are stuffed into mailboxes; lists touting the best toys of the year fill magazines, and commercials marketing the hottest toys tantalize youngsters. Although the sales pitches are seductive and the spirit of the festive season contagious, many parents still wonder what approach is best when buying presents.

In order to make the holidays more fun and the gifts more meaningful, keep in mind the following tips:

1. Remember the age of the child. Certain toys and gifts are suitable for children of specific ages. Manufacturers often provide accurate suggested age ranges on toys or store clerks know what appeals to children at different ages. But in addition to the gift itself, consider the reaction of the child receiving the gift. Toddlers revel in tearing wrapping paper but may ignore the gift inside. Overwhelming them with a large variety of gifts is thus unnecessary and unappreciated. Preschoolers love to open presents that are identified as theirs alone. They may especially enjoy a series of small surprises or gifts that involve activity either a game to be played alone or in a group. Older children, however, pay more attention to the gift itself and the culture surrounding particular "hot" gifts, thus they may appreciate a few specifically requested gifts. Regardless of their age, all children may need help maintaining realistic expectations about what they will receive.

2. Remember the temperamental style of the child. Children reveal their own particular temperament from birth onward. They are often consistently more shy, active, or easy going. Holiday time and present opening can throw these styles into overdrive, with children of different temperaments coping with and approaching the fuss and festivities in individual ways. Some children become overwhelmed by too much stimulation. Halfway through a pile of gifts they may break into tears just when their parents expect smiles. Moving on to another activity or spacing out the gift giving times may help modulate the stress. Other children may become fussy and short-tempered as Christmas, Hanukkah or Kwanzaa approach. Some children become uncomfortable with the change in routine while others can be worried about how their behavior will be judged, thinking they are to be rewarded or punished at the holiday. A surprise treat given before the holiday can help an anxious child wait. Focusing on non-gift activities, involving children in the preparations, and keeping some semblance of a routine schedule can also help diminish the tension.

3. Gifts should be tailored to the interests of the child. Figuring out what to give can be as difficult as deciding how many things to give. Wish lists make the job easier. With the help of an adult or older sibling even young children can compose a list of the presents they would like. Adults may prefer to give gifts with particular value such as education related materials. But to make any gift a success, it helps to investigate the child's personal likes, dislikes, and abilities. Books, for instance, may not be appreciated by a child who is having trouble learning to read. Knowing blue is a child's favorite color can make the difference between a fleece vest that's worn or ignored. Timing and ease of use are also important, especially when buying gifts for younger children. Pre-schoolers, attuned to the here and now, want to play with their gifts when they get them - and want the batteries to do so. They may be disappointed by a swing set that won't be assembled until spring.

4. The cost factor is important. Parents with a limited budget might consider creative ways of getting gifts. Options include gift swapping with friends whose children no longer use a particular item, sharing the cost of expensive dolls, clothes, or electronic equipment with their child or other relatives. School-aged children can save their allowance and do extra chores to contribute to a special item. Teens can also save their job earnings. Sharing the cost of a gift is a great opportunity for parents to sharpen their children's consumer skills. Reviewing television commercials and magazine ads teaches children to critique what they see. Giving children a hypothetical amount of money to spend and asking them to fit their wish list into this budget by checking catalogues and web sites helps them be realistic and financially savvy. Many children feel pressured to keep up with the latest fashion or want the toys their friends have. Discussing these issues helps children figure out what they really want and prioritize how to spend their money. Parents should also model cost efficient buying for themselves when with their children. Belt tightening affects a whole family, the opposite may also ring true at times. When money is more plentiful it should be generously shared within and outside the family.

5. The most precious gift parents can give their children is the gift of time. For many people, the most lasting memories of the holiday season are things done together such as making cookies, lighting candles, making traditional decorations. Some parents even give a lasting gift of time in the form of coupons for particular times or events redeemable throughout the year. Instead of buying everything, families can spend time together making their own holiday cards or gifts, wrapping presents for teachers, friends and relatives. It's important to point out the special meaning of the time and activities thus passing along this spirit to the next generation of givers.

6. Parents should be aware of their own feelings as they choose gifts. Parents have their own history of holiday gift giving and receiving that affects their approach to gift giving with their own children. Some individuals who may have felt deprived of material goods when they were younger, may buy too much for their own children. Others, who may feel depressed during the holidays, may go in the opposite direction and have little motivation to buy any presents. Sometimes parents use gifts to make up for feeling they are absent from their children's lives. Gifts, however, are not a substitute for affection and attention. Divorced couples and step-parents need to be especially careful not to use elaborate gifts as a way of competing for their children's love.

7. Parents can use the holiday season to cultivate the joy of giving. Projects such as donating to a charity can be a yearly family tradition. Giving older children their own individual money to donate to a particular cause of their own choosing also teaches them to take on the responsibility for themselves. Starting a family coin collection for the local toy fund, collecting art supplies and warm clothes for needy families, delivering a holiday meal to a sick person are some other examples of activities for the family to work on together. It will not be long before kids learn wealth comes from what is shared rather than from what is owned.