August 2006 - Some of the reasons we have for not talking to children about money include our own lack of knowledge, the fear that we're not practicing what we ought to be preaching, and the fact that our parents didn't talk to us about money. Don't let these barriers stand in your way.
As soon as children can count, introduce them to money. Keep in mind the following guidelines when educating children about money or other subjects:
Money lessons and your expectations need to be age appropriate. Concepts to teach and activities to provide to your children include:
Lessons in life
Occasionally express your desire to have things you can't afford. They need to hear that you, too, have to tell yourself "no" to spending money. Delayed gratification should lengthen as the child ages, with goal setting for achievement or for items they want as their motivation. Delay spending by requiring comparison shopping, a list of pros and cons for the purchase and thrifty alternatives.
Teach the difference between wanting and needing. For an older child create a list with three columns- needs, wants and wishes. This comparison helps children see that the three do not go together. As they make responsible spending decisions, let them keep the money they saved. Teach them that spending is not a fix for a negative feeling.
Ways to teach about money
One important lesson is how to track earnings, spending, and savings in order to know how you're doing financially. Ask your child to write down transactions into specific categories each month.
Another method for learning about money is to use the grocery store as your classroom. Demonstrate how to plan a meal, use leftovers, shop by unit price, question coupon or sale values, figure costs of eating out (including tax and tip), and ways to create lower cost options.
Teach about ways to build a good credit rating, and if your older child does not have a regular full time income, do not give them a credit card as it sends the message to "SPEND." Co-signing means you're liable and does not help them establish a credit rating. Credit purchasing can have a far more negative impact on a financial future than any other money decision.
Establish a regular schedule for a family financial discussion. Report current balances and concerns and work together on coming up with solutions to reduce expenses, avoid credit debt and increase savings.
Sometimes the best motivation for wise spending is to plan how to do more with the money you save!
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