YOU Magazine - October 2009 - Learning the Value of Money 9 Ways to Teach Financial Responsibility to Children
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Derek Egeberg - NMLS#180899     Derek Egeberg - NMLS#180899
Branch Manager, Loan Officer
Academy Mortgage (NMLS 3113)
Phone: (928) 247-9089
License: BK 0904081
derek.egeberg@academymortgage.com
www.az.academymortgage.com
Academy Mortgage (NMLS 3113)
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Learning the Value of Money
9 Ways to Teach Financial Responsibility to Children


Learning the Value of Money - 9 Ways to Teach Financial Responsibility to Children


If the current economic recession has taught us anything, it's that financial education and responsibility are critical in today's fast-paced, wired world. All too often, however, children grow up immune to the financial world around them. As a result, they're often ill equipped to manage their own finances when they become adults and leave home.

With the economy in the news almost daily, now's a perfect time to start educating your children about how to manage money more responsibly. The tips below can help you get started.

1. Give an Allowance

If your children don't have money of their own, it's hard for them to really grasp the value of it. So if you don't pay your children allowance, consider starting. You don't need to pay a lot–a little goes a long way. The most important thing is that your children learn the value of completing even small chores around the house to earn their own money.

2. Make a Plan and Set Guidelines

Before you start giving your children an allowance, sit down with them and set some expectations. Discuss the specific chores and timelines for completing those chores, as well as the amount of money they'll earn for each chore and when they'll be paid. This helps instill a strong work ethic in children as well as drive home the message that money is earned, not given.

3. Save for the Future

As part of your financial discussion, consider implementing a savings rule for your children. For example, make a rule to save half or one-third of their allowance. You can go with them to the bank to establish a savings account in their name and then take them to make their deposits. Or, if your children are still young, you can set up a special savings bank. Let your children decorate a jar or can to give it some personality and then have them deposit a portion of their money in that special bank whenever they receive their allowance.

4. Educate on Interest

Talk to kids about savings accounts and the value of interest. If you start a savings bank at home, offer to pay your kids a small amount of interest on their savings. Once a month, sit down with your kids and count how much they have deposited, how much interest they have earned, and how much they have as a result. Compare the amounts each month, so your children can see the benefits not only of saving, but also the benefits of compounding interest.

5. Save for a Big Purchase

The next time your child shows you an expensive toy or big-ticket item that he or she wants, consider striking a deal where the child saves up for half of the cost. For instance, consider a "match plan" in which you match every dollar your child saves for the item. This will not only teach the value of saving, but also help your child learn to budget and plan for expenses–which is a lesson that can pay off in the future when your child becomes a credit-card-carrying adult.

6. Take Your Children Shopping

Take your children grocery shopping with you. As you go down your shopping list, have your children help you compare the prices of the different brands, sales, and quantities per package. You can also have your children try to keep a running tally and make a guess of what the total cost will be.

7. Set Them Free to Shop

Once your children have a sense of money matters, you may want to take the lesson up a notch. For instance, when your children need new school clothes, you try giving them the money and putting them in charge of what to buy. Then, as they shop, help them compare the prices and number of items they can purchase within their budget. You could even purchase a Visa gift card with a specific dollar value on it. That will help your children not only learn about the value of a dollar and making smart purchases, but it will also introduce them to the credit card system, in which money may not seem real because it's unseen. In today's electronic financial world, this lesson will become more and more important as your children get older.

8. Teach by Example

Remember, children are always watching. So if you educate them on saving for purchases and budgeting but make rash decisions on big-ticket items yourself, you may find them learning a different lesson than you intend. So make sure you follow your own rules when it comes to spending, saving, and fiscal responsibility. You may even want to consider discussing your donations to help your children understand the importance of supporting charities.

9. Be Consistent

Teaching children about money isn't something that can be done in a short period of time. Children are always re-experiencing their environments and testing their boundaries. So make sure that once you implement an allowance, savings, and budgeting plan that you stick with it. Over time, you may decide to raise your child's allowance or change the terms of their savings. But those shouldn't be quick decisions. Instead, if you and your child want to revisit the financial plans or to add a new element, take the time to sit down, write out what the changes will be, discuss how this will impact the child's level of responsibility, and make sure you end the conversation with agreement on what will happen going forward. Then, be consistent; don't waiver.

At times your child may beg for an exception. But by being consistent, your children will be much better prepared to deal with the real financial world that they'll face when they grow up.




LO# 0915245 BK# 0904081 Corp NMLS# 3113 Corp CA# 4170013 CA-DOC180899 Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act.

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