Teaching children money habits


No sooner are the holidays over, and the New Year rolls around, when one’s attention is turned to April 15th, the deadline for filing income taxes. It is not presumptious to assume that tax time is not everyone’s favorite hour.

Many people dread this time of year except for those highly organized individuals amongst us that have been ferreting away receipts all year long in carefully labeled folders. Those much to be envied folks have their bank statements in order, a place for everything and everything its place. Sadly, I am not among the organized crew. Rather I am the individual that starts out with good intentions in January and by June have begun to stockpile receipts in different places.

There is no excuse for my lackadaisical record keeping other than lamenting that I should have learned about fiscal organization earlier in life. I still behave as if I am expecting a deus ex machina to appear on the scene and make it all work. Suze Orman! Where were you when I was growing up?

Orman, the popular financial advisor and advocate for rational spending writes that children who are brought up in households where the tension exists around taxes, mounting credit card debt and unpaid bills feel guilty and that they are at fault. "Children think they are the center of your universe. Because when you lie awake at night worrying about how to pay your bills, don't think your children won't see it on your face in the morning." Why not teach your children about proper handling of money and develop habits that will last a lifetime.

An important aspect of learning how to handle money is how to deal with the barrage of advertising and pressure to buy that children experience daily on television and from friends. Parents can divert the attention of children from excessive materialism by encouraging a passion for collections, the arts, individual sports and of course reading.

Creative children are happy children and tend to be less demanding about having to purchase the latest fad. One of my own private tutoring students has been in the process of building a tree house with his father for the several years. He is so busy that clamoring for the latest and most visible toy does not ever come up. The encouragement of resourcefulness and creativity in children is a gift of a lifetime.

The time that it takes to teach children how to handle money carefully is a worthwhile venture. Parents can start teaching about handling money when children are young and continue until they are ready to go out on their own. An excellent source of information on the topic is with a University of Minnesota online extension series entitled “Teaching Children Money Habits for Life”. The tips provided in this course are very helpful and easy to follow. Valuable suggestions include activities developmentally structured to reach the youngest child through late adolescence. Central to teaching children about money is being consistent and having open discussions about money issues within the family. Parents will need to address the differences in children’s ages and personalities in their planning.

When children are included in discussions about how money is earned, spent, and saved they will naturally grow up with concepts such as comparison-shopping, setting financial goals, short and long term planning. Children understand and overhear so much of what goes on in a family by observational learning. Why not then include them in discussions about money matters in clear and direct terms taking into account their age and stage of development?

It is important that both parents involve themselves in teaching children how to handle and work with money. Historically, this responsibility was given to the man as the breadwinner. Women that did go out to work often handed over their paychecks to their husbands. Girls then were raised with the idea that they did not need to become responsible for money, which could lay the groundwork for frivolous spending. The whole family should be involved in discussing money issues even when problematic. To coin a phrase ‘Knowledge learned today can be earned tomorrow’.

Bernie Bucks, a financial manager for kids has published several books, written software, and has a free newsletter for parents. He believes that financial planning with children should begin as young as three or four when the child becomes aware that money is to be spent.

When the child is given an allowance the first thing they should be taught to do according to Bucks is give away 10% to a charity of the families choice. This act will make a more lasting impression on children than an occasional handout as noblesse oblige. As the child grows older their knowledge of what to do with money should increase.

Pre-teenagers might divide the remaining 90% of their money in half, which will be placed in a long-term savings account. The other half is income to be spent that would go into their checking account. As the child grows older will need more personal income to meet increased needs. They and everyone else should be saving 10% of their income in long-term accounts. (Bernie Bucks Free Parenting Guide). When Bernie Bucks does not suffice turn to the Rich Kids Smart Kids website whose “mission is one of education and empowerment…. committed to improving the financial literacy of children around the world. This site has online education and many products for sale that can enhance learning.

A words to the wise, before purchasing any materials make sure that you feel comfortable with the orientation of the products. Rich Kids Smart Kids is very well organized and the information beginning with a rudimentary economics vocabulary is useful.

Another really fun Internet site is Young Investor (Younginvestor.com) where children can play games while learning about topics like mutual funds. In one game you drive a car down Wall Street and learn the difference between bulls and bears. Older children will enjoy having the opportunity to ask a question about financial matters which an expert will respond to. The questions are archived making for hours of interesting reading. So much valuable information teaching children about how to successfully handle money is readily available on the Internet. Children exposed to these activities may well develop habits that will lead to a lifetime of organized successful financial planning.

And alas, I am planning to take my own advice and use these resources myself. At last I may not have to search frantically for receipts and dread the Ides of April. It is not too late to start and maybe next year I will not face tax time with chagrin.