Monday, October 22, 2012 at 10:17pm by Site Administrator
This is Part II of a larger educational resource, Money Management: A Guide to Teaching Finances to Children.
Teaching financial responsibility to your children need not be a chore for anyone involved. Incorporating lessons about finances into age-appropriate games, careful administration of an allowance and seizing teaching moments as you lead your own life all serve to instill financial prudence.
Monopoly anyone? With predictable earned income, exposure to unexpected expenses and many opportunities to become overextended, this family classic continues to teach kids eight and older valuable financial lessons while being fun for the whole family. Young football fans may enjoy Visa’s online Financial Football, where players must correctly answer quiz questions before advancing players down the field toward a touchdown.
Wells Fargo’s Savings Quest allows players to choose a character’s job, create a realistic budget, and perform assigned tasks to earn a paycheck; savings goals are monitored over time and displayed in easy-to-understand visuals. Many families also go off the electronic grid and play the grocery game, where children are provided with a small amount of money and a shopping list, and must carefully allocate their money to purchase all of the items.
As parents, providing an allowance shifts the burden of spending from you to the child, because he or she takes responsibility for that money. Some families allocate allowances based on an amount that is increased as the child grows older, and some families prefer to instill the concept that money must be earned and base allowances on household chores.
It can be especially helpful to help children budget their allowances. Many parents adopt the 80-10-10 rule, where 10% is saved, 10% is donated and 80% is reserved for discretionary spending. Saved money can be deposited into an interest-bearing savings account and foment a useful conversation about how interest works.
Model Good Financial Behavior
To have financially disciplined, responsible children, parents must model that behavior. Involve children when you pay bills, for example, and show them any money management software or tools that you use. Good spending habits can also be discussed and demonstrated whenever opportunity arises. Some examples include:
- Restaurant: “Let’s skip the appetizer and save a bit since we just bought tickets for the big game.”
- Grocery store: “I’m not going to buy the chocolate-covered espresso beans since I want to get Dad that nice watch for his birthday.”
- Mall: “I know that sweater is pretty and fancy, but these sweaters are on sale and they’ll match all of your jeans.”
Continue to Part IV: Understanding Credit & Credit Cards for Young Adults or return to the Table of Contents.