This is for those with kids in the 'tween years.
My daughter couldn't understand why daddy's pay while it sounded like a lot when you said the total, really wasn't.
Say the total is $300. 'Well, MOM! that Jesse McCartney CD is only 16 dollars!' she may say.
This is what I did:
I got out the Monopoly money, made $300 in 50's 20s and 10s. and one 100.
I told her the weekly expenses, groceries, gas, water bill, electric bill etc. I told her to give me the amount for each bill, taking away from the $300 she had.
When I got done, the amount that remained was considerably less. I said, 'Now, the rest is for your lunch money, and things we don't figure for. I explained that incidentals almost always come up, and what was left had to last until next pay day.
She was at the age at that time (14) to understand what the point I was trying to make. She did not like it, but she understood it.
Seeing is believing. Just telling them sometimes just isn't enough, but SHOWING them often pops that light bulb of understanding.
This tip came from a parent who is a financial planner.
She gives her two sons, ages 6 and 8, $4 a week as an allowance. They each have three piggy banks. One dollar goes into the bank marked "Saving," one dollar goes into the bank marked "Charity," and the other two dollars go into the "Spending" bank. The boys may do whatever they like with their money in their individual spending bank. When the "Saving" bank has accumulated $10, she takes them to the bank to deposit the money into their college account. Every Sunday, the boys empty the "Charity" bank to bring to church. On occasion, they bring it to the animal shelter instead.
This was a simple, yet powerful way to teach children how to budget their money. We develop good money habits at a very young age.
One could also increase the allowance to $5, putting the extra $1 into a bank marked "Government" representing the taxes taken out of a paycheck.
DO I LOOK LIKE A BANK? TEACHING KIDS ABOUT MONEY
"Mom, all the guys are going to the go-cart track and bowling on Saturday. Can I go? And can we invite Josh, too? Pleeeeeeze?"
Money doesn't grow on trees. It magically appears in your wallet. At least, that's what some kids seem to think.
Kansas City parent Tiffany Chapman and her husband, Merv, don't just hand over the cash. "We might have the money," she says, "but rather than just give it to our kids (Megann, 14; A.J., 13; and Sam, 10), we ask them to come up with half the amount, then we'll give them the rest. That lets us know whether they want to sacrifice their own money. If they don't want to sacrifice, why should we?"
Good idea, echoes Matt Schoenfeld, executive director of Heartland Financial Counseling in Countryside, Kansas. Schoenfeld warns that young people also often misunderstand basic credit principles. "They see that little card as an unlimited source of money instead of a loan," he says.
Schoenfeld encourages parents to start early in teaching their children about money. "The principles are the same regardless of age; it's just the way you package them," he notes. "For instance, with ages four to seven, you might use the typical piggybank idea, but as they get older, you'll move into a savings account. Then they hit the teens, and you can introduce things like mutual funds so they can get a broader spectrum of
ways to save."
The key is to explain financial concepts simply. Some ideas:
Borrowing from the concept of employee savings plans, Chapman also matches the amount her kids accrue in jars, dollar for dollar. She cautions them against spontaneous purchases, saying, "Let's hold off. If you still feel like you want it next week, we can come back.
"We tell our kids not to get into debt, because what you want now, you'll have to pay for later, and later you'll want something else that you won't be able to get, because you're still paying for the other thing."
GET THEM HOOKED ON SAVINGS
We opened them a checking account specifically for kids at our bank that paid about a nickel of interest each year. That just wouldn't do. I discussed it with my husband, and we decided that we would pay them 10% interest on each dollar saved, so the kids could really watch their money grow. Combined with the fact that we charge them interest for loaning them money beyond their normal allowance, they can see the difference in saving $1 (which automatically becomes $1.10) versus spending a dollar they don't have (they owe $1.10).
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