|Teaching your kids to be money-savvy
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.
With the help of parents, children in elementary school can begin
to differentiate between something they desire and something they
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
Begin by having discussions about advertising
"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.
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.