Teaching Kids the Value of Money

Want to teach your kids about money? Start early, use age-appropriate activities and hold their interest by making connections to something they love.


"Keep it simple, keep it fun and keep it relevant," advises Lynne Strang, vice president of communications for the American Financial Services Association Education Foundation.


For Kids 10 and Under
To introduce children 10 and under to money matters, you’ll want to employ some kid-friendly strategies:


Count your cash:
"Counting games help kids learn about money and math," says Susie Irvine, the foundation's president and CEO. Illustrate the value of different denominations by having kids break down a dollar bill into nickels, dimes or quarters. Use actual coins to make the exercise more concrete.


Play games:
"Introduce your kids to games like Monopoly," says Irvine or let them play grocery store. Set up your kitchen with empty boxes and containers and have your kids "buy" groceries with a set amount of money.


Clip coupons:
Have kids clip coupons for products you use and then total up the savings. Let them deposit a portion of what you save into their piggy bank, says Strang.


Pinch pennies:
In the aisles, compare the costs of store brands, sale items and name brands. Help your kids figure out how much of each you get with the same amount of money, says Irvine. Challenge them to road test a less expensive product.


Make allowances:
Start giving your kids a weekly allowance. "The earlier you start it, the better off your child will be in the long run," says Irvine. Your guidance on how to manage money, not the weekly grant itself, is the real benefit.


Instill savings habits by encouraging kids to set short term (i.e., reachable) goals for special purchases, says Laura Levine, executive director of the Jump$tart Coalition for Personal Financial Literacy.


You might also want to have them set aside a percentage of their allowance or savings to donate. One cool tool is Money Savvy Generation's "Money Savvy Pig," says Levine. The bank has four slots, labeled "save," "spend," "donate" and "invest."


Money Savvy Generation (www.msgen.com) offers a kit that includes the pig, a 44-page parent handbook, an 8-chapter CD-ROM, a 21-page student workbook, a coloring book and a poster, all for $29.95. The kit is recommended for children ages 5 to 11.

For Kids 11 to 15
"If you want to teach your kids about money, keep it simple, fun and relevant."
When kids reach this age, you’ll be able to tell if they have a natural instinct for money or need help. If your kids fall into the latter category, have them try the following exercises:
Work out a budget:
Let them use your back-to-school budget to help them make choices about what they need this fall, says Levine. Set ground rules—like no "belly shirts," or sneakers must cost less than $50. Beyond that, let your kids decide what they need and what trade-offs they’re willing to make.

Let those decisions open up a conversation about smart spending.
Hunt for bargains:
Encourage them to look at the newspapers and comparison shop, says Irvine. Consider letting them shop for groceries.
Negotiate a larger allowance:
Discuss what you both expect it to cover, says Irvine. Ask your kids to create a list of regular expenses and optional entertainment expenses. Talk regularly with them about what they're buying, giving and saving.
Open a savings account:
At the bank, let them fill out the paperwork, says Strang. Then help them draft a short term financial plan (or budget) to save for something they really want.
Talk about plastic:
When you pay with a credit card, explain to your kids that you're using it now (for the convenience, rewards, an interest-free loan, etc.) but will be paying off the entire amount in a few weeks, says Irvine. They learn that cards are a tool, not a magic wand. Explain that a debit card allows you to tap into your checking account—provided there is enough cash in the account.
Let older kids dissect a credit card statement, says Strang. What’s the balance? What’s the APR? Talk about credit records and what happens if you don't pay bills on time.
For Teenagers 16 to 18
Grab older kids' attention by demonstrating how they can get something they want—like a car or the latest electronic device—through saving. In addition, try the following:
Get tech-savvy while teaching them to be smart about spending:
Take a technology your kids understand well, like cell phones, and ask them to explain the different features to you. Have them research the cost of various wireless plans. You gain their knowledge, and they see just how expensive the services and extras can be.
Make them accountable:
Privileges carry price tags. If your kids rack up bills by going over phone minutes, losing a retainer or scratching your fender, they pay the tab. You might also ask them to keep a record of every cent they spend so that together you can later compare their actual expenditures with the budget they created.
Give older teens access to your credit card:
With some teens, you might consider extending credit privileges, says Irvine. (But cosigning on a card of their own or making them authorized users on your card can impact your credit.) If you’re going to do this, set limits and give your teens the 411 on APRs, due dates, carrying a balance and identity theft. Since this is a lesson, make sure their statements are sent to you so that you can examine the bills together.
Discover EDGE contributor Dana Dratch writes frequently about money and personal finance for national publications.

 posted by Jane