How do you teach your child to become a smart consumer?  The answer to that question is:  start early! 

I suggest you begin giving your child money lessons the first time they say “I want.”  The statement may be made as early as 3 years old so you need to be ready.  

When my 3 year old niece first spoke ‘ I want that’, I remember I was very happy. But just today morning, she drove me mad saying she wanted to wear a blue hairpin that belongs to her mom. I like your advice, but I am not sure how to talk to a young child who’s at her nagging best about needs and wants.  ~Saika~  Submitted on 2010/04/09 at 12:41am

When they say it – how about responding with an age appropriate reply – such as:  “You want to get that toy?  You already have one of those.  Do you know how much it costs?  It costs $3 dollars.  Hold up three fingers.  That’s how old you are.” 

Wait for their response or reply.  Will it be a question or statement?  Will it be a meltdown chant – “I want this toy!”  Regardless their reaction or your decision at that moment, know that you’ve begun a planned approach to teaching your child the fundamentals of personal money. 

You can re-introduce the concept any time.  When getting your toddler ready for the day – ask questions that allow you to use want versus need, such as:  “Do you want to go outside and play?”  Then ask: “But first do you need to go to the bathroom?”  Explain that going outside to play is what they want to do but going to the bathroom right now is what they need to do. 

As your child grows – so will his or her memory of the things they’ve heard that are needs versus the things that are wants.  Then you’re ready to up the ante and provide them with more concrete ways of understanding the difference and how the choice between needs and wants really matters.  

Gradually as they get older you introduce the concept of saving for something special rather than always buying something when they’re out with you.  And this opens the door for you making a point of explaining why you don’t/won’t buy things for them on impulse.  This conversation is one that leads to a much bigger concept:  the benefits of delayed rather than instant gratification.  

Now they’re beginning to appreciate the fact that it’s their money – which allows you to respond:  “Yes it is.  IT’S YOUR MONEY SO TAKE IT PERSONALLY ™.  Good job!”

Here’s to your health and wealth.

TAGS: April is Financial Literacy Month, Families, Kids and money

OK.  It’s April 15th.  Tax Day.  This is the day we all have to deal with Uncle Sam.  But instead of talking taxes – let’s continue our conversation about raising financially responsible children and why their money education should begin at a very early age.   

For many children, their first experience with personal money is when they get an allowance.  Many money experts suggest giving a child 50-cents or a dollar for each year of their age.  The actual amount is less important – at least initially – than the sense of financial independence. 

An allowance will help your child learn to handle their money and provide you an opportunity to introduce to them the idea of savings and why savings are important.  Look for banks in your community that have activities and incentives to help kids learn money basics. 

One of the important basics of money is learning to set goals that require accumulating a certain amount of it.  Talk to your child and ask what their goals are.  If it’s something they want, it’s the carrot that serves as their incentive.  Pardon the pun but – that way – you don’t have to become a nag.  And it’s yet another opportunity to discuss the difference between wants and needs. 

Just as I love the phrase – “reading is fundamental” – I tell children and their parents that “saving money is fun and mental”.  I want them to understand that minding over money really does matter.  I want them and their parents to embrace the philosophy that:  IT’S YOUR MONEY SO TAKE IT PERSONALLY ™.  An early sense of ownership of their “income” through birthday and holiday gifts, their allowance or summer job can create an excellent personal money management foundation for the future. 

April is Financial Literacy Month.  Tell a friend and share the wealth of money knowledge.

Here’s to your health and wealth.

TAGS: April is Financial Literacy Month, Kids and money

When does it make sense to start talking to your children about money?  I suggest very early. 

The age of three works for me because that’s just about when children start saying, “I want.”  When those words are spoken, I think you should have the first conversation with your child about needs and wants.  Make it simple.  Respond appropriately.  Don’t expect anything more than repetition of “I want” – but at least you’ve put in place a tiny bit of groundwork.  Each time the “I want” chant starts – ask if this is a need or a want and explain the difference – appropriately and personally to your child. 

Over time you will find that your child will begin saying what “it” is that they want – but you’ll find they will start asking whether what they’re asking for is a need or is it a want.  Take the moment and explain the difference.  Congratulate them on knowing how important it is to know the difference.

My entire mindset is finding a way to talk to your children about money.  They might not be mature enough to understand basic financial concepts but they will understand that money is something they can talk about.  With that knowledge – as they get older – it will be much easier to teach them about handling money wisely.  It will become habit forming. 

These early conversations will make a difference when it comes to offering your child an allowance which is usually a child’s first experience with the sense of financial independence.  Be sure to explain to them what an allowance is why, they’re getting it, whether it is tied to doing household chores or not and how they will choose what to do with this money.  

This is where I’d start talking to them about something called savings and the benefit of learning this life lesson early.  Tell them a mantra they can bank on forever.  Tell them IT’S YOUR MONEY SO TAKE IT PERSONALLY ™. 

April is Financial Literacy Month.  Here’s to your health and wealth.

TAGS: Allowances, Raising money smart children, savings

In my May 28th blog (http://thethinpinkline.com/209/05/28/allowance), I wrote about kids and allowances.  I’m a firm believer that giving an allowance is a good thing and helps parents guide their children onto the road to financial responsibility.

I received a comment and a great question from Jessica, the mother of two small children:  “I have very young children, 2-1/2 and 4-1/2, who adore candy machines and constantly want quarters from us.  So I devised a simple system of “jobs” they do daily and we mark completed on our “job board”.  After a week of completed jobs, they receive 2 quarters, and usually spend both as soon as they leave the house.  Their jobs include household chores like clearing the table, putting away their toys, and feeding the dog.  I’ve also included some social skills like sharing and saying please.  And this gives us a chance to work on personal developments like getting dressed by themselves and brushing their teeth.  So far, it’s been very successful!  They are motivated every day to check things off their job board and look forward to earning their quarters.  However, I’ve been thinking about introducing the idea of saving — maybe they put one quarter in a bank and can spend the other quarter.  Do you think I should “encourage” or “require” saving?  I have to admit their father and I are not good savers and I would love for the boys to learn better habits.  I’m just afraid they are still too young for it to be effective.”

I thoroughly agree with what Jessica is doing with her two little ones and think her method is solid.  But want to again acknowledge that money specialists are divided about whether allowances should be tied to chores.  Some (like me) think it’s important that children see the value of work to earn money.  Others think chores should always be done as part of the family needs – separate from the allowance.  And then there are those who advocate putting a value on specific chores.

As for the idea of introducing savings – my answer to you, Jessica, is – absolutely!  I believe that savings should be required.  I believe that the concept of savings is mandatory otherwise your children will only know that what they “earn” can be spent as you indicated:  “They receive 2 quarters, and usually spend both as soon as they leave the house.”

I’m furthermore very impressed by your honesty regarding:  “I have to admit their father and I are not good savers.”  Not many adults would admit to that, Jessica.  That admission is really key because children learn their money habits (as they do other habits) by watching and imitating their parents.  Although your children are very young now, they will tend to carry the money messages they learn at this early age – with them into adulthood.  So, no, they’re not too young for the message of saving money to be taught right now.  Here’s how:

Give both of them three clear plastic or non-breakable glass jars and help them label them savings, sharing and spending.  Then explain that you are giving them a raise of ten more pennies to 60-cents a week.  Tell them what a raise means:  “Mommy and Daddy think you’ve both been doing such a ‘good job’ with your jobs - that we’re giving you a few more coins every week.”  Jessica, this suggestion of a raise is really just so they can potentially and more easily see and give equal 20-cent amounts to each of their jars.  Then talk to them about:

• Savings.  “It took Daddy and me a whole year to save for xx.”  Show them a calendar, turn the pages of the twelve months that make up a year being sure to mention special things that happen during that period of time – birthdays, special holidays and so forth – to give them an idea of how long it takes to save money.
• Sharing.  “The money in this jar is what you use to help other people who are having a hard time right now get something they really need.“  This gives you the opportunity to begin and continue conversations about the difference between wants and needs.  I told my grandchildren that if they want something, they will need to pay for it from their piggy bank but if they need something – which means something that I agree with them is important – I will help them pay for it or even buy it for them.
• Spending.  “You get to buy whatever you want with your money – if you have enough.”  This allows you to explain the value of items that they have just been used to getting and introduce the choice NOT to spend anything sometimes – which takes you back to another conversation about choosing to save and another opportunity to show by example why always saving some money is very important.

Thanks for your comment, Jessica.  I hope these suggestions work and that you and your husband will show the children – by your example – that saving money is now absolutely part of your family’s plan.  Among money specialists, we refer to this concept of consistently saving as paying yourself first meaning you always put away a portion (however modest) of any money you earn or get – into savings or retirement (and into both if you can).

Here’s to your health and wealth!

TAGS: Allowances, children and money, saving money

As far as I’m concerned, it’s never too early to learn how to manage money.  Just ask my 6-1/2 year old grandson Morgan.  I started having conversations with him about money when he was a toddler and started saying:  “I want.” 

Those early little chats started with semantics.  I’d ask:  “Morgan, do you need that or do you want that?”  And I explained the difference between a need and a want:  a need was something I agreed was so important that I’d help him get it (aka buy it for him); a want was something he’d like but didn’t have to have  so his piggy bank would need to pay for it.

Repetition worked.  And as he got older, he came to understand that repetition was just another word for consistency when it came to money conversations with me – Grandma GoGo.

Which brings me to the subject of kids and allowances.  True – there are different schools of thought when it comes to giving a child an allowance.  But it’s a conversation that happens in just about every household whether the family income is large or small. 

Many people believe an allowance is an essential stepping-stone to learning the value of money.  Others don’t agree.  As a financial journalist, a mother and grandmother of two young children (Morgan’s little sister Savannah is my other grandlittle and she’s 2-1/2) I believe allowances allow parents to help guide their children onto the road to financial responsibility.

Every household will have different ways of approaching allowances, but if you choose to accept the “give them an allowance school of thought” - there are some concrete ways manage allowances successfully.

So how do you get started?  The best time to introduce the idea of an allowance is when your child can count dollars and coins and understands the concept of prices.  Some money specialists say this is usually around 5 or 6 years old. 

Then the big question is – how much allowance should you give?  The answer is – there’s no one-amount-fits all suggestion – although lots of studies say the rule of thumb is a dollar for every year of age.  That might not be appropriate for everyone and it also depends on the frequency of the allowance – which I suggest be weekly because then there’s a consistency and continuity to the money management lessons.

Some things to consider when deciding how much:

• Your child’s age.  You want to make sure to give room for increases as your child gets older.  So be careful not to start with too high a number for younger children.
• Your family income.   The only way to teach financial responsibility is to practice it.   Your child’s allowance must fit within your family budget. 
• What the allowance will pay for.  If you expect your teenager to pay for his or her clothes with their allowance, you might consider a higher amount than if you will continue buying their clothing for them.
• Before handing over any allowance money – teach the money basics.   Discuss the difference between needs and wants, saving, spending, investing, donating, and of course – earning. 
• Encourage your children to keep records.  Help them get a better understanding of their allowance money “activity” by having them keep a simple accounting of what’s spent (and hopefully what’s saved) in a notebook.  You’ll be able to use that to “show them the money” lessons when needed to make your point and/or to congratulate them on good management.
• Give allowance in denominations that encourage saving.    For example, for $5 give five one-dollar bills and suggest that at least $1 be set aside for savings.  Then explain that if they chose to save all their allowance, $5 a week at 6% interest compounded quarterly will total about $266 after one year and $3,527 after ten years.  For some children, this straightforward information about what they’ll later come to know as the magic of compounding – will cause the savings bug to bite.

As for whether allowances should be tied to chores – money specialists are divided.  Some think it’s important that children see the value of work to earn money.  Others think chores should always be done as part of the family needs - separate from the allowance. And then there are those who advocate finding a way to blend the two by putting a value on specific chores.

However you decide to teach your children about money through allowances – good for you!  The fact that you’re introducing the concept of earning money is a big step towards growing their financial knowledge.

Here’s to your health and wealth.

TAGS: Allowances, financial responsibility, Kids and money, needs and wants