AS A 37-YEAR-OLD SINGLE MOTHER, Yvette Saul knows that the key to her financial empowerment starts with her ability to create and maintain a savings initiative and to adequately manage her family's finances. And while she didn't learn this as a child, she is determined to make sure that her 11-year-old daughter, Savannah Gay, learns the concept of proper money management. By educating her daughter at an early age, Saul is ensuring that little Savannah is more inclined to practice sound budgeting as she gets older. In doing so, Saul is adopting Declaration of Financial Empowerment principle No. 7: to provide access to programs that will educate my children about business and finance.
"It's extremely important for me to teach her about money and financial planning," says Saul. "Although money is not the root of happiness, it certainly is the pathway to happiness by being fiscally responsible as an adult."
In a turbulent economic environment, and with the uncertain future of Social Security, it's even more important that parents pass on the basics of personal finance. The learning process should start when you're a child. Parents have to teach children the value of money and guide them in their spending, encourage them to save, explore entrepreneurship opportunities, and expose them to solid financial planning. By using a few of the principles found in our Black Wealth Initiative, we offer you a step-by-step guide to help start your children down the right path. Open a savings account and show children how to save. Since the age of 5, when Savannah opened her first savings account with $100, she has been on a path toward saving and money management. And while she is tucking away 40% of her $20 weekly allowance into a savings account, Savannah is following DOFE principle No. 2: to save and invest 10% to 15% of my after-tax income. Savannah has spent some of the money while on family vacations and on other personal items. She currently has about $700 in her account.
According to New York City-based financial consultant, Ivanhoe Ffriend, of Ffriend Enterprises, parents cannot underscore enough the importance of exposing their children to the sacrifices that go into planning the family budget. The value of money can be taught early on by teaching children how to bargain shop or collect coupons.
Teach children to respect the value of money. A child's attitude toward money will determine how he or she uses it in life, according to Laura Levine, executive director of Jumpstart Coalition, a Washington, D.C.-based national organization that develops standards to teach kids about finance in grades K-12. "A lot of times it's a value decision, but we encourage parents to include a lesson at home that teaches their children about the value of money."
Inspire children to budget. Getting children to track their own spending is a great way to start and follow DOFE principle No. 4: to engage in sound budget, credit, and tax management practices. Parents might have to give children an incentive to keep track of their expenses such as a financial reward or a day off from chores. Showing them the importance of budgeting for items they need versus spending extravagantly is critical.
"Children must realize that there is an inflow and an outflow of money and you don't want the outflow to be greater than the inflow or else we become financially over extended," says Gwendolyn Kirkland, a certified financial planner at Kirkland, Turnbo & Associates, in Chicago. "A budget establishes financial boundaries. So when they're asking for different things, parents can say they either budgeted or they didn't budget for it."
Encourage children under the age of 8 to divide money into different categories. Perhaps they should have one piggy bank for saving and another piggy bank for spending. By the time your child turns 9, talk to him or her about creating a small budget to keep track of income and expenses. …