Magazine article Work & Family Life

Teaching Kids to Manage Their Money

Magazine article Work & Family Life

Teaching Kids to Manage Their Money

Article excerpt

Not all families give children a regular allowance. Some give kids spending money on an as-needed basis. But for many Americans, allowances are part of family life.

Parents give a regular allowance because they want their children to have the experience of handling money and, at the same time, teach them to appreciate the value of their hard-earned dollars.

"You can't just give kids a lecture on how to manage money," says educator Sally Tannen. "It's one of those things they have to do in order to understand. And it's a gradual process. A child can't learn about budgeting, spending and saving in one or two years. It takes experience, trial and error, making mistakes-and learning from them."

Child psychologist Matti Feldman suggests a realistic goal for younger children is "to have them understand units of money and to know that they can't take something from the store without paying for it." Feldman thinks of an allowance as the teaching of beginning economics. "Young kids assume there's an endless supply of money--if you need more, just go to the bank and get it. The main lesson in economics is that there is a limited amount of funds that an individual or a family can choose to spend in different ways."

Whatever families decide about giving allowances, the decision-making should be part of an ongoing process of communicating values about good and bad spending and also about saving.

A good way to help children understand the concept of saving is to point up the difference between money parents spend on daily necessities, money saved for long-term purchases and money saved for long-term goals such as a college education.

If you can, reward your child for saving money, For example, you might want to say: "If you can save half of the money you need for a bike, I will give you the other half."

Family rules should be applied to spending money just as they apply to other things. If Grandma gives your seven-year-old a check for $50, parents should require some portion to be saved or invested. Just make sure your bank won't charge extra for maintaining a small savings account.

On the whole, however, don't interfere with

how kids spend their money, because they need to learn the consequences of their decisions. …

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