Children's collecting, trading skills
can develop their money savvy
By Jay MacDonald • Bankrate.com

As any parent well knows, kids save the darndest things: Pokemon cards, comic books, sports memorabilia or Barbie dolls with all the accessories.

They are great little savers. Naturals at it, in fact.

Collecting plays a fundamental role in shaping a child's saving and financial skills. From locating suppliers, searching for the best price, acquiring their collection and trading with other collectors, they learn the basic concepts of value, relative worth, comparative shopping, bargaining, even diversifying a portfolio.

So instead of thinking of that collection as just junk or something they really enjoy, why not recognize that your kids are exhibiting a talent you can use to help build into real-life financial savvy? As you teach them about money, remind them to compare their new money skills to how they collect and trade.

That's right, comic books might have a higher calling.

"Kids today are smart. They are extremely sophisticated," said Catherine Pulley of the American Bankers Association. "Obviously, if a child can work with a CD-ROM and play games, they have the ability to grasp the kind of concepts that come with savings and fiscal fitness. I don't think we give kids enough -- for lack of a better word -- credit, when it comes to understanding money."

So why on earth can't we teach them how to save it?

Teach your children well
Among the world's industrialized nations, America ranks near the bottom in savings. When it comes to saving money, we're the fat little boy with the Snickers breath hopelessly looking up at the climbing rope.

"Parents don't teach their kids their financial ABCs," said Pulley. "It's not that kids don't care about money, it's that they don't really know it, understand it, deal with it, touch it, feel it on a regular basis."

But, as any parent will tell you, they sure know how to spend it.

Why Jenny can't save
The reasons Jenny can't save are varied.

There's the developmental issue for starters. Up until perhaps kindergarten or first grade, the concept of relative value is difficult for a child to grasp. Children playing Junior Monopoly will typically want 10 $1 bills rather than one $10 bill, for example.

"They have a lot of trouble with that equivalency concept," said Gail Karlitz, author of Growing Money: A Complete Investment Guide for Kids. "Even in our change, the fact that a dime is smaller than a nickel but it's worth more is confusing to a child. At an early age -- preschool -- you can start teaching them what money is, that all this change can equal a dollar."

Ah, but there's a second problem. Kids see less actual dinero these days.

"Money is way more abstract than it used to be, with charge cards, debit cards, smart cards, ATMs and checking," said Karlitz. "When you tell your kid you do not have money for something, they say, 'Just go to the ATM and get it,' because that's what they see people doing. Or write a check. I never see money. It's all on paper. And that's abstract, even for us. It's very abstract for a child."

Which brings us to a third issue: Mom and Dad themselves.

"With baby boomers, their parents never had an ATM card, they never had a credit card, they never had a smart card, they never had a check card, so it doesn't click in their brains that they need to teach their children about this," said Pulley. "This is where the baby boomers have all these banking instruments at their fingertips and they need to connect the dots and say, 'OK, I need to teach the kids about this.' "

We also save differently now, with no-load mutual funds, 401(k) plans, SIMPLE and SEPs and IRAs. If you were a kid, you would probably just be hearing "blah, blah, blah" when your parents are talking about money.

Starting Junior down Tycoon Road
OK, it's confusing, even for adults sometimes. But you can get your kids started on their money education with a few simple steps:

• Explain it to them: Just because money is more abstract than it used to be doesn't mean you have to be. Tell them how this stuff works. "It's very important for parents, when they're paying with a credit card, to explain, 'OK, this doll costs $10 and I'm going to give this man the card and that will let him take $10 out of my money in the bank. This gives him permission to do that,' " Karlitz suggested.

• Give them hands-on experience: Once they grasp what money is, let them "play" with it. Let them pay at the grocery store. Take them to the bank and open a savings account, with a passbook they get to keep. Find a special jar where they can save allowance change.
  
  
• Help create early success stories: "I think the early experiences with saving have to involve very short periods of time, even if you're giving the kid a quarter every day and he has to save it for a week," advised Karlitz. "They have to start with a time frame that they can deal with. If something is expensive, like a bike, I don't think you can ask them to save for it if it's going to take a year because kids just don't have that attention span."
  
  
• Let them make choices: Do I want the candy bar or the Pokemon cards? It will mean more to them if they've saved the money themselves (and you're not there to buy them both!).
  
  
• Include them in family budgeting: "Children learn by doing," said Pulley. "When you're making up the family budget, include your child in it, so that when they're 18 and either in college or starting out on their own, when they receive their first paycheck, they'll say, 'OK, I need to sit down and make a budget now.' "
  
  
• Guide them to cool Web sites: Whatever you child's age, there's likely a Web site they will find fun and educational. Best of all, they won't cost you a cent.
  
  
• Teach them good money morals: It can be tricky to teach your kids to save while at the same time keeping money in perspective. "How do you get kids to value themselves and other people? Can you still be a worthwhile friend if you just have the $50 tennis shoes?" Karlitz asked. "That's a whole self-esteem thing. I think it's also important to expose kids to people who don't have money as part of their education."
  
  
• Pick up those pennies: Like the man said, it's not the money, it's the principal (pun intended). "It's a good idea to value change," said Karlitz. "It's good to collect pennies and then go to the store and buy something with them, even if it's a candy bar or something, to show that they have some value."

Jump-starting our schools
Try as they might, most parents alone won't make their children fiscally fit. That's where our schools come in. Unfortunately, the need for money know-how comes at the very time schools are stretched paper thin in trying to meet core curriculum needs.

In 1995, more than 80 of the nation's financial companies formed Jump$tart, a coalition aimed at making financial education available in the schools. Their motivation is simple: An educated public will both spend and save more wisely, resulting in fewer defaults.

"It has definitely become a more complex subject with the advent of new financial instruments," said spokeswoman Dara Duguay. "While parents in the past were able to explain the basics, nowadays it's more a case of the blind leading the blind. If they haven't had anyone teach them about these instruments, how can they expect to teach their kids?"

In 1999, Congress passed a nonbinding joint resolution calling for financial education in grades K-12 nationwide. A nice gesture -- but one with problems.

"The schools are a wonderful venue because you have a captive audience and the network to train teachers," said Duguay. "The problem is, if it's not required in the curriculum, you can't train the teachers."

Financial ignorance today, said Duguay, is dangerous.

"It is more dangerous to be ignorant about money today because you can easily get in over your head due to the wider availability of credit at a younger age," she said.

To get started, let the kids tell you how they make their collection judgments, which item is best, which is worthless, which card they'd give up and which they wouldn't even though it's worn and torn. Money management might even become child's play to them when they realize what they're doing with their collections.