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by: posted Thursday, April 5, 2012
The financial crisis was a wake-up call for many - but for parents, the lessons didn’t go far enough.
While half of moms and dads give their children allowance, only 4% require them to deposit that money into a bank account, according to a recent study by financial education website DoughMain. Just 27% take their kids into a bank to make monthly transactions.
Parents are falling behind, even though the majority feel it’s their responsibility to teach their kids about money and savings.
“We are not doing a good enough job yet,” said Laura Levine, president of Jump$tart Coalition, a nonprofit focused on boosting kids’ financial literacy.
“Regardless of whether you have a lot of money or not,” guiding your children on financial matters “is critical.”
April is Financial Literacy Month and a good time for you to start that money talk with your child. We asked the experts to weigh in.
Spread the message of the importance of money
Explain to your child that achieving their goals and aspirations is tied to a healthy understanding of money basics, the National Financial Educators Council (NFEC) said.
Make saving second nature
Have your child set aside a portion of any money they receive, whether it is from an allowance or birthday gift.
Family finance website TheMint.org recommends children split their savings into four "banks": money to be used soon, on everyday things; for later, on larger items; for building a nest egg to be used years from now; and for giving gifts to others.
Get them to the bank
Open a savings account with your kids. Then encourage them to manage it with regular deposits to build a sense of responsibility.
Once they're older and perhaps working part-time, they can learn to manage a checking account. But be sure to supervise their accounts to avoid overdrafts and to keep their banking experience positive, the NFEC said.
Get your kids involved with the family's weekly grocery shopping.
Write a shopping list together and set a budget before going to the supermarket with the kids. Before you go, have them help clip store coupons.
Teach like a mom, think like a kid
Kids need to be taught that work yields money in language they can understand, said Ted Beck, president of the National Endowment for Financial Education.
Say your child wants to buy a toy that costs $30. Explain that it may take several hours of chores to afford that item.
Curb their appetite for spending
“If there is something they want, tell them to sleep on it, it may not be as shiny tomorrow,” Beck said. “You are asking them to sit back and make an informed decision.”
Teach the basics of investing
Start with lessons on the stock market and interest rates. Using a compounding calculator, like the one at TheMint.org, is a fun way for kids to learn how their money can grow over the years if a small sum is placed into a savings account, CD, money market account, bonds or stocks.
Encourage them to be entrepreneurs
Nothing hammers home lessons in money management than earning your own.
Getting paid to do extra chores around the house, or starting their own "business" like walking dogs, mowing lawns or washing cars around the neighborhood, builds a strong foundation - and work ethic - for the future.
Be a role model
“Set a good example,” Levine said. “It’s hard to teach about money if you are overspending.”