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From my inbox...
Ways to Teach Kids That Money Doesn't Grow on Trees
by Eric Tyson
8 tools to make your job easier
If you're looking for a silver lining to the economic
slowdown, it's the perfect impetus for your kids to learn
smart personal finance habits. So if you're feeling guilty
because you can't buy your child that video game system he
desperately wants or send him to that trendy summer camp.
Don't. In fact, now is the perfect time to teach your kids
some valuable financial lessons.
Kids are surprisingly aware of what's going on in the world.
And if they don't know that times are a little bit tough and
Mom and Dad are having to watch their spending, it's time to
tell them. Sheltering kids from financial realities does them
no favors.
Indeed, the opposite is true. A good grasp of personal finance
is one of the most valuable life skills a person can have. And
while previous generations may have been raised with the
constant admonishment that "money doesn't grow on trees!," too
many of today's parents neglect that lesson. It's time to
change that, and the economic slowdown we're in now provides a
great incentive for doing so. Ready to get started? Try these
helpful hints:
- Realize that kids learn what they live. It may sound like
common sense, but you are your kids' most influential teacher.
When you ring up a barge-load of credit card debt, take out
exorbitant mortgages or car loans, and fail to save anything,
that's what your kids come to see as normal. If you are
modeling unhealthy financial habits, you can't realistically
expect your kids to "do as I say, not as I do."
- De-program them. Kids are constantly bombarded with
information about what things cost, whether it's the fancy
sports car they like or the wardrobe of their favorite athlete
or actor, not to mention the 40,000 commercials that the
American Academy of Pediatrics estimates the average American
child sees each year. What they aren't bombarded with is
knowledge on how to manage money effectively. And while
schools are increasingly incorporating money issues into the
existing curriculum, the broader concepts of personal
financial management still aren't taught. Frightening though
it may be, some schools rely on free "educational" materials
from the likes of VISA and MasterCard!
- An allowance is a great teaching tool. A well-implemented
allowance program can mimic many money matters that adults
face every day throughout their lives. From recognizing the
need to earn the green stuff to learning how to responsibly
and intelligently spend, save, and invest their allowance,
children can gain a solid financial footing from a young age.
- Start them saving and investing early. It's never too early
to start saving, and the sooner you can instill the importance
of saving money into your kids the better. After they start
earning an allowance, have your kids save a significant
portion (up to half) of their allowance money toward longer-
term goals, such as college (just be careful about putting
money in children's names as doing so can harm college
financial aid awards). As they accumulate more significant
savings over time, you can introduce the concept of investing.
- Reduce their exposure to ads. The primary path to reduced
exposure to ads is to cut down on TV time. When kids are in
front of the tube, have them watch prerecorded material. And
for older kids, if you use digital video recorders (DVRs),
such as TIVO, you can easily zap ads. But when an ad does
sneak under the radar and set the kids to begging, address it.
Invest the necessary time to teach and explain to your kids
that the point of advertising is to motivate consumers to buy
the product by making it sound more wonderful or necessary
than it really is.
- Teach them how to shop wisely. Family shopping trips,
whether for groceries or something else, are likely to be your
kids' first encounter with spending. They'll see you make
decisions based on what the family needs, maybe see the
occasional coupon used, and will observe how you pay. These
trips are a great time to teach them lessons about money.
- Introduce the right and wrong ways to use credit and debit
cards. Those plastic cards in your wallet offer a convenient
way to conduct purchases in stores, by phone, and over the
Internet. Unfortunately, credit cards offer temptation for
overspending and carrying debt from month to month. Teach your
kids the difference between a credit and debit card,
explaining that debit cards are connected to your checking
account and thus prevent you from overspending as you can on a
credit card.
- Encourage older kids to get a job. An allowance doesn't have
to be the only way for your kids to earn money. Your child's
initial exposure to the work-for-pay world can start with
something as simple as a lemonade stand. Depending on age, he
or she might do yard work for neighbors or offer babysitting
services. And the fact that we're in a recession makes it all
the more appropriate for older kids to "help out" by getting a
part-time job, especially to fund unnecessary purchases like
DVDs or cool clothing.
Besides the learning opportunities it presents, there's
another positive to the economic downturn. It forces families
to be more thoughtful about how they spend their time and this
often leads to the stunning realization that money really
doesn't buy happiness.
Often, the pricey toys we buy and the lavish vacations we take
are simply distractions from the people we love. They send the
message that it's necessary to spend a lot of money in order
to have a good time. It's not, of course. The best things in
life (friends, family, quiet evenings at home just being
together) really are free. Sometimes it's good to be reminded
of that.
_____________________
Eric Tyson, MBA, is one of the nation's best-selling personal
finance book authors and the author of "Personal Finance For
Dummies" (Wiley). He is also the author of "Investing For
Dummies" and co-author of "Home Buying For Dummies" and "Real
Estate Investing For Dummies," among other titles. Eric is a
former columnist and award-winning journalist for the San
Francisco Examiner. His most recent book is "Let's Get Real
About Money! Profit from the Habits of the Best Personal
Finance Managers" (FT Press, December 2007, ISBN-10: 0-
1323416-1-1, ISBN-13: 978-0-1323416-1-5, $19.99) is available
in bookstores nationwide and from all major online
booksellers. For more information, please visit
www.ftpress.com.
Take the Next Step:
- It's time to stop feeling guilty for the things that you
can't give your kids. Now is the time to focus on what you can
give them. Use the current economic slowdown to teach your
kids some valuable financial lessons. After all, a good grasp
of personal finance is one of the most valuable life skills a
person can have.
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