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Teaching your kids to be money-savvy
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Julie Lovett, a mom in Fort Worth, Texas, was surprised one day when her daughter, Amanda, was pretending to sell pies. Lovett asked her how much a chocolate pie cost. Amanda, age 4, promptly responded, "Five dollars -- but we take debit cards if you don't have cash."

Lovett was shocked that her daughter knew what a debit card was! "I don't know where she learned about debit cards. Maybe she hears the store cashiers asking, 'Will that be debit or credit?'" Lovett says.

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Ages 6-8
With the help of parents, children in elementary school can begin to differentiate between something they desire and something they need.

Kathy Griffin, founder of Money U, the online campus for personal finance, currently being field-tested and scheduled to be released in early 2006, agrees that parents must play an active role in helping children understand the difference between wants and needs.

Begin by having discussions about advertising on television.

"When children express a want, you can have any number of conversations starting with 'Why do you want that?' and helping them correct their language so that they understand the difference between wants and needs," Griffin says.

Griffin also advocates working with your child to develop a savings plan so that they can save for things they want.

"The effort they have to put toward acquiring something that they just 'have to have' often helps them decide that the object isn't so necessary after all," Griffin says.

Children at this age can also learn to develop and stick to a budget. It should be a gradual process that gives them control over their expenses and helps them build financial confidence. "By the time your child is in second or third grade, they are probably able to manage their own lunch money," Griffin says.

Then you can suggest that friends' birthday presents, charitable contributions and maybe school supplies become part of their responsibility. They can learn to pay for these expenses by using their allowance, which will need to be increased to pay for the additional expenses.

Ages 9-12
By the time children are preteens, they begin to develop a sense of social responsibility. Emphasize the concept of donating money. Your child can decide where they will donate money and can personally see the positive benefits of their donation.

 
 
Next: teaching money management has become a critical part of parenting
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