By Kathy Brandt
Illustration by Joel Snyder
When youngsters are old enough to ask for something in the grocery store, it's time to begin teaching them how to budget, spend wisely, and save.
Imagine this scene. Judith is in line at the grocery store with son Patrick, age 5, who is carefully examining the rack of candy and gum. When he pulls a pack of bubble gum off the shelf and asks his mother to buy it, she hesitates for a minute. But, then, it's only a small purchase. She adds it to her other groceries. Then at the drugstore, as they pass the toy aisle, Patrick sees a coloring book and begs Judith to buy it for him. She asks him if he really needs another coloring book. "Yes, yes," he replies, "and new crayons, too!"
Patrick really doesn't understand the concept of money. Although he does notice his parents get it at a place called "the bank" or out of a machine called "the ATM," it's just paper that they always have. He has no idea that his parents have to work for it and that it is limited. Patrick's desires will no doubt escalate as he grows--possibly to $100 tennis shoes and designer jeans. As long as Judith and her husband willingly and readily pay for all of Patrick's wants and needs, he is not likely to learn how to spend responsibly or to understand that the purchase of one item may prevent the purchase of another.
How can Patrick learn to manage money effectively?
Actually, children can be taught about money as early as age 5 or 6. Neale Godfrey, author of Money Doesn't Grow on Trees: A Parent's Guide to Raising Financially Responsible Children, says that when children understand that Mommy and Daddy go to the store and buy things with money and when they are old enough to ask for something in the grocery store, then they are ready to learn more about money. That is the time to begin teaching children how to budget, how to spend wisely, and how to save.
Give children an allowance
In order to manage money, children must have access to it. The ultimate goal of giving kids an allowance is to help them learn the difference between needs and wants and to teach them to set priorities and save. Says Grace W. Weinstein, columnist for Investors' Business Daily and author of Children and Money: A Parent's Guide, "an allowance is the single best learning tool. Kids need to handle it themselves, making their own mistakes."
If you don't give your kids an allowance, you are managing their money for them by deciding what they need or should have. As a result, "The child's role becomes that of salesperson and manipulator," says David McCurrach, creator of Kids' Money Journal, a financial management system for kids, and the Kids' Money Web site (http://pages.prodigy.com/kidsmoney), an interactive resource for parents interested in fostering responsible money management habits in their children.
"Let them learn to manage their own money," says McCurrach. "You'll save money and avoid some of life's major battles."
To determine the amount of allowance, make a list with your children of what you expect them to pay for. This solves conflicts that may come up when you visit a store. Remember that you also want to give them enough so that they can save a portion and give away a portion--whether for the Sunday collection plate, an important cause, or charity. Amounts should increase as kids get older and their needs become greater.
Most experts agree that allowance should not be linked to routine chores. Children should help around the house because they are members of the family. If children fail to do chores, consider withholding privileges rather than allowance.
Parents can also provide opportunities for their children to earn extra money by doing jobs not included in regular responsibilities. Older children can be encouraged to baby-sit for neighbors or friends, do yard work, or take care of pets.
When children work for money, they learn the value of each dollar and that having money involves an investment of time and energy.
Train children to spend wisely
John Messervey of the National Family Business Council recommends that parents help their child keep a journal to track where he or she is spending the allowance. Once a week write in dates and amounts and show the child how and where he spent the money, how much is left, and how much is being set aside for savings. That way, your child can start learning to budget and plan.
Or you can help children make a spending plan when they get their allowance. Have them make a list of what they think they need and talk about how costs vary. Talk about the trade-offs, for example, in renting three movies a week as opposed to one or in buying a new pair of running shoes now or waiting for a sale. Help them think about things that might be coming up that they may want to plan for, such as a friend's birthday. Suggest that they consider a cushion for the unexpected, such as an invitation from a friend's family to go to an amusement park.
Include children on shopping trips to teach them smart shopping techniques and what things cost. Let them compare product quality, price, return policy, warranties. Children learn through example. Let them know how you save and invest and include them in conversations about budgeting.
Some parents wonder whether they should loan their children money. Says Beverly Tuttle, president of Consumer Credit Counseling Service, "It just invites the attitude that has made America a debt society--buy now, pay later. It runs counter to the notion of planning."
But on occasion, you may want to help your child with a purchase. When the bicycle our son wanted was offered at a reduced price, we loaned him the money that he had not yet saved so he could take advantage of the sale. It is important, though, to make it a learning experience by teaching about borrowing and by setting up a clear plan for repayment.
Encourage children to save
Finally, parents need to provide an environment that promotes saving and shows children the benefits of doing it. Teach them to set financial goals and help them to develop the discipline necessary to meet those goals. Assist them in thinking about a sensible amount to save.
Let your 6- or 7-year-old child pick a toy that is priced so that it will take only two to four weeks to save enough for it. Let him collect the money in a jar that has a picture of the item taped to it. The younger the child, the more manageable and short-term the savings/spending cycle should be. This kind of activity begins the habit of saving for purchases.
A piggy bank helps the younger child actually see his or her money grow. When children are old enough, take them to the bank and let them open a savings account. Bank literature is available which explains savings and interest and is usually clear enough for a third grader to understand. Parents can help their children go over statements and explain how earnings accumulate through interest.
Helping your children understand how to manage their money is one of the most important skills you can offer them. In doing so, you prepare them for a responsible and happier adulthood.
Kathy Brandt, a frequent contributor to this column, is a freelance writer in Colorado Springs, Colo.
Teaching Money Management in Scouting
Since so little is taught in school about money management, Scouting can provide an early opportunity for children to learn more about money matters. Of course, all of the resources discussed elsewhere in this article might be tailored for a Scouting project. In addition, several activities and/or requirements for badges are outlined in Scouting handbooks and pamphlets.
November-December 1998 Table of Contents
Copyright © 1998 by the Boy Scouts of America. All rights thereunder reserved; anything appearing in Scouting magazine or on its Web site may not be reprinted either wholly or in part without written permission. Because of freedom given authors, opinions may not reflect official concurrence.
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