| We would all like our
children to be financially astute but it seems that
too many young people acquire credit cards and start
spending without learning basic money management
skills.
Children don't seem to understand that, if
they 'pay' for the latest mobile phone or concert
tickets by credit card, they still owe that money
until they have paid off the card debt.
They take at face value 'interest-free' deals and
wind up paying far more than the price of the item, if
they haven’t paid for it before the interest free
term expires. Their attitude is that they have to have
what they want, whether or not they can afford it.
You can start giving your children a financial
education when they are toddlers. Let them hand over
cash for items when you shop, or play shopkeeping
games with them. Many small children are under the
misapprehension that banks just hand out money when
you put in your card - explain in simple terms that
that you and/or your partner go to work each day to
earn that money, which the bank keeps for you until
you need it.
Start a piggy bank. A simple glass jar is
best so they can see their money accumulating and can
take it out and count it at any time. Pay them small
amounts for simple chores around the house, e.g. 20
cents for bringing in the mail. As they grow older and
more capable, they can earn larger amounts for setting
the table, emptying the dishwasher or drying the
dishes.
Encourage saving. Get your children to think
about something special they would like to buy or do
with their savings, e.g. a new computer game, a movie
ticket, a particular item of clothing. Sit with them
and set a time line for saving. Write down the cost of
their goal and work out how much per week they will
have to put aside.
| Item |
Cost |
Weekly Amount |
No. of weeks |
How long will it take? |
Got it! |
| CD player |
$349 |
$30 |
12 |
3 months |
4 |
To encourage their children to continue saving,
some parents offer to match their children's savings
dollar for dollar.
Open a savings account. Transfer their piggy
bank savings to a bank account. Choose one
specifically targeted for children that has no account
fees and earns more than nominal interest. Once
children could use their bank passbooks to watch their
money grow, but today they can see the amount growing
on their bank statements. Explain how the interest
rate works.
Encourage your children to bank a percentage of
their pocket money, as well as any money received for
birthdays and Christmas, for example, 10%.
Give pocket money. Regular pocket money
helps children to learn budgeting skills. If they
spend it all immediately, they will have to wait until
the next payment. Rather than handing over cash, pay
the money into a bank account; the physical act of
going to an ATM makes them think about how much to
withdraw, and the balance slip tells them how much
they have left in their account.
How much pocket money should you pay? Whatever you
can afford, and fits within your budget. Don't feel
pressured by how much your children say other parents
pay. Pay it on a set day, and don't pay in advance.
How does it work? Some parents give pocket money
without expecting anything in return. Others expect
some basic tasks to be done as it gives children an
understanding that money has to be earned.
It is not advisable to pay children for routine
household activities such as making their beds or
tidying their rooms, but they could be expected to do
extra chores, such as putting out and bringing in
garbage bins, washing cars or dogs, or vacuuming, in
return for their pocket money. It is also not wise to
pay children for schoolwork, for example, to complete
homework or to improve their grades.
Set ground rules. Children should be told
exactly what their pocket money is expected to cover
and what parents will pay for once that money is
spent. For example, older children might receive
larger amounts to cover their clothing, entertainment
and transport needs. Do not continually bail them out
of trouble or they will never learn to live within
their means.
As your children get older, explain the cost of
living. Take them to the supermarket so that they
can see how much it costs to feed the family each
week. Show them your regular bills for power,
telephone and so on.
Teenagers are deliberately targeted by television,
radio and magazine advertising, and pressured by peers
to spend, spend, spend. At this stage of their lives,
it is important that they are able to discuss
financial problems with parents and that parents have
a realistic understanding of their costs. Adjust their
pocket money accordingly, or encourage them to find
part-time work to finance all the 'extras' they want.
Finally, it's no good trying to teach your children
how to handle money if you are unable to live within
your means and are constantly in debt yourself -
children learn more from watching what you do rather
than listening to what you say. |
Let
us show you, step by step, how you can take back
control of your money and your life!