The Money Store - Teaching Kids About Finances

Did you know that many children think there is a "Money Store" where we get more money if we run out? That is what my 4 year old told me today and I am finding that many children his age also have that belief regardless of the money wise environment that their parents think they are raising them in.

There are many steps that parents can take in teaching their child the basic concepts involved in saving and spending and the fiscal responsibility that comes with it.

ALLOWANCE & BUDGET
If your child is old enough to say "Buy me this" and perform small household tasks then they are old enough to have an allowance. Many experts suggest giving them one dollar equivalent to their age. However if you have a large family and a low income household that method could break your budget pretty fast! The important thing is that you spend time teaching them about long-term savings. Let them open a savings account and give children the option of donating 10% or less to charity. In essence...help them set up a budget!

DELAYED GRATIFICATION
It is a natural behavior for young children to beg for items they see in the store and dealing with the "Gimmie" attitude is part of being a parent. But how a parent reacts to a child demands can have very long lasting effects on how your child will look at money. If parents give-in to their child begging for items then it teaches them to beg. A very simple concept but everyday you can find parents and grandparents at the grocery store who should get failing grades in this area. Isn't a constant pattern of instant gratification what has lead America into their obsession with credit cards?

Start teaching principals of delayed gratification early on by helping your child make a wish list and perhaps offering to match funds when they reach a certain amount. Adriane Berg co-authored the book "The Totally Awesome Money Book For Kids" and suggested that you can even lend your older child money to reach their goals. She suggests to "charge a small interest to illustrate the downside of borrowing".

YOUR SPENDING ENVIRONMENT
The facts are that our children are influenced by their environment and that includes how they look at money. If children see their parents checking the price tag on items prior to purchase or putting something back because of inflated prices it will have a positive financial effect on their attitudes. Comparison shopping has been taught. Each time parents pull out their credit card, take advantage of the teaching moment to explain how interest, billing and spending limits work. At the ATM make sure young children know that the bank was taking care of the money you got for your allowance.

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