Children's Financial Intelligence
Lessons about money often take years of mistakes, poor purchases and exercises in self-control. Let's look at a few specifics we can do today to prepare our children for a future filled with good money skills.
1. Find a bank or credit union that will allow you to open a small savings account for your child. Our children each started with a $10 account when they were two and three years old. Start as young as you possibly can so that your child can see the account's growth over the years. You never know when the right teaching moment will occur and having this account set up ahead of time allows you to use it as a teaching tool when "the moment" occurs. Our first teaching moment came when our boys were four and five years old and we happened to be in our old college town. The boys were shocked to find out that they would have to pay for college. We were able to show them their "college money" as a concrete lesson and a reassurance that they could prepare for their future.
2. Let them pay for their own toys as soon as possible. When children are young (ages two to eight), tell them they have five dollars to spend if they can be good during the shopping trip. Adjust the amount of money earned to comfortably fit whatever budget you would normally spend on toys if you chose your child's toys for him. You may want to set it up so that your child has to "work" for the money: if he misbehaves, he loses one dollar for each warning. He may throw fits at the lost money but it's all part of a learning process. Also, he'll see that some toys are overpriced and some are a great value. There will be many "mistake purchases" along the way, but a $5 mistake when he's little is better than a $5,000 mistake when he's older.
3. Consider how you're going to handle allowances. Experts have said that if you give your child a "free" allowance, you're teaching them that they are entitled to money, the welfare mentality. If your children earn their allowance by completing chores, you're teaching them to work for an employer (you). It's best to teach your child to spot opportunities. My children recently spotted the opportunities behind garage sales and their rooms have never been cleaner!
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