Home with the Kids Newsletter July 19, 2005

The Editor's Desk - From Beneath the Clutter
Feature Article - Teaching Your Children About the Value of Money
What's happening on the discussion boards?
Guest Article - 8 Steps to Financially Intelligent Parenting
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The Editor's Desk - From Beneath the Clutter

I decided to focus this week on kids and money. There are lots of theories on the best way to teach children how to be responsible financially, so you have to decide what you are most comfortable with.

We finally got moved into the house. I'm still catching up with things, since I didn't have an internet connection for a few days. Thank goodness nothing appears to have gone wrong!

Gage will be getting cast for his second DOC band helmet today. I almost feel bad putting it on him again, but his head is still a little bit squared off. He's been so happy having his hemet off for the past week and a half. He's lifting his head, playing more and even trying to crawl already. With the helmet on, he wasn't even lifting his head. I just have to keep reminding myself that the results will last for a lifetime in exchange for a few uncomfortable months that he won't even remember.

Now if I could only decide how I want to paint this one....

Don't forget, you can contribute your articles or tips anytime for consideration. Just use the contact form.

Feature Article

Teaching Your Children About the Value of Money

We take it for granted that children know how money gets into our wallets. The tips below will guide you through teaching your children the value of money.

Now I'm not referring to the value of stocks and bonds, compounding interest, or the current market value of a U.S. dollar.

What every child should be taught at some time, is: the purpose of jobs (how we earn money), saving for goals (how to save money), limit needless spending (how to budget).

It's up to you to decide when and at what age it is appropriate to discuss the following topics. But keep in mind that if you don't teach them the skills to make educated, responsible decisions with their money, you will be holding back a valuable lesson that should be taught. Learning how to successfully manage money is a skill they will have for life.

Where To Start

Don't assume your children know the meaning or purpose of a job, bills, banks, etc...

Let them see you pay your bills. Explain to them how you have 'X' amount of dollars per month to pay for everything. Point out the dangers of getting into debt (credit cards). Explain that ATM machines are not magic money dispensers that give you as much money as you need, for free.

Learning comes from experience. Just talking about money will not get the job done. Learning how to earn, save and spend money appropriately comes from real life experiences.

If your children do not have an allowance already, think about starting one. Only when they have their OWN money to manage, can they put your lessons into practice.

When you are discussing allowance with your children, relate it to your own life. Explain to them that when you want to buy something, you must first work to earn money, then save enough money in order to purchase it ie: car, house, clothes. Tell them that if you don't go to work and earn money, there's no way you can afford to buy what you want.

You can then explain to your children that if they want to buy a new toy, they must earn the money in order to buy it.

It's Up To You

You can design your childs' allowance and chores however you see fit: weekly, bi- weekly, monthly, pay-per-chore.

One method that's effective is designating 'X' number of chores, for 'X' number of dollars per week.

For example: "Johnny. You will earn $5 a week if you do these jobs/chores: water the lawn (twice), take out the garbage, vacuum the house (twice), and feed the cat everyday."

It's up to you to develop a list of chores that can be done around the house, and an appropriate allowance amount to go with it. In other words, you shouldn't have your child painting the whole house for a quarter.

You should also be sure and make the jobs/chores age appropriate. A twelve year old will be able to do more than a seven year old, so take this into account when thinking of chores.

Now don't confuse allowance, with the basics. What are the basics? Keeping their room clean. Doing their homework. These are jobs that should be done without question. Period.

Once You Start

When your children earn their allowance for the first few times, they will want to immediately go and spend it. Fear not. This should be expected. Here is where you can start to teach your children.

Sit down with your children and talk about the "things" they want to buy. Have them prioritize their items on a list, in order of importance. This list can be considered their "Goal Sheet" - the reason they are saving their money.

Have them keep this list in their wallet/purse/piggybank, so they will always be able to look and see what they are saving for. You should also keep a copy of this list just in case they lose it, or want to purchase something that's not on it.

The next time you are in a store, and your children want to use their money to buy something, first ask them: "Do you have your wallet/purse that has the money you've been saving?".You can then ask them if that particular item they want to buy is on their list.

Asking these questions will get them thinking about the items importance. Is it more important than the other items on their list? Let your child make the decision whether to buy or not.

Regardless of what you say, more than likely your children will make the purchase even if the item is junk. That's ok! This is a lesson your child must learn. Only when the initial thrill of the toy wears off, or when your child realizes that the other items on his/her list were more important, will they begin to understand the value of their money.

Conclusion

These are only some of the possibilities you might want to look into. Regardless of what you can take from this article, adapt it so it fits into your family lifestyle.

Money management is a learned skill that comes from real experiences. It is very important that children learn the value of money and the role that it plays in our lives. Teach them how to make smart, educated buying decisions. Stress the importance of setting priorities and working to achieve that goal.

Once your child achieves one of his or her goals, they will understand what it takes to be successful. They will know how to budget their money and limit unnecessary spending in order to buy what they REALLY want or need.

Gregory Thomas has been writing money-saving articles for SavingSecrets.com now for over 6 years. Hop on over to their website and you'll find FREE money-saving articles, a monthly newsletter, and even a FREE Ebook download just for stopping by! http://www.SavingSecrets.com

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Guest Article

8 Steps to Financially Intelligent Parenting

What you say and do about money has a profound influence on your child. There are money moments every day that you can use to teach your children important skills and lessons about life. But what to say or do isn't always obvious. Is it a good idea to pay for chores or grades? How do you help your child develop a work ethic? How do you structure an allowance to help your child learn to make choices? Why is involving your children in charity so important? Jon and Eileen Gallo, experts in the fields of children, psychology and money, provide parents with eight key behaviors that will help them raise financially responsible children:

Encourage a work ethic
Work ethic is a learned behavior, and parents are the best models to teach kids to acquire it. If you want your children to work hard and derive meaning and satisfaction from what they do, make sure you are modeling the right messages. Insisting your kids do their homework and help around the house does not guarantee they will grow up with a sense of accountability and a desire to achieve. Developing a work ethic in your child is a holistic process and the eight money behaviors of a financially intelligent parent are keys to this process.
Get your own money stories straight
Because you send your children messages about money all the time, it is imperative that both you and your spouse are on the same page when it comes to your money stories. A money story is an open, honest and personal story of your relationship with financial issues, especially as you grew up because most people's relationship with money developed during childhood. You need to identify why you feel the way you do about money so you can send coherent and consistent messages to your kids. When both parents focus on their money stories, children receive positive messages. Getting your money stories straight does not just mean that you agree on basic issues such as allowances and college savings. It also means that both of you have agreed to identify certain basic money values you want to teach your children, such as giving is good, working hard is its own reward, and you don't always get everything you want.
Facilitate financial reflection
As with most decisions kids make, when it comes to money decisions they are frequently impulsive. As a financially intelligent parent, you want to teach your children how to think in terms of choices, alternatives and consequences. This is called reflective thinking. Learning how to reflect both before and after making a decision is a great life skill, and one that is the hallmark of people who make good choices in everything from careers to relationships to investments. Financially intelligent parents teach their children to evaluate financial consequences based on available choices rather than making impulsive decisions. As a result, children recognize that there are many options available and they acquire the skill to make good choices.
Become a charitable family
By teaching your children that they can do more with money than spend it on themselves, you encourage them to become more compassionate and caring. By participating as a family in volunteer and community activities, you help your children develop empathy and a sense of responsibility to others. Your children will realize they have the power to make life better for others. Because children learn through modeling behavior, you have to do more than write a check to charity. You need to show your children what it means to help others. Modeling charitable behaviors, including volunteerism, can jump start your child's empathy and desire to help others.
Teach financial literacy
Although it is important to teach children how to balance a checkbook and create a budget, to become truly financially literate your children must learn within a context of values and money behaviors. Your children need a combination of concrete examples, their own experiences and financial reflection. If they do not learn to behave responsibly with money as kids, they will have to learn as adults when the cost is much higher. One of the best tools to teach your children financial literacy is an allowance. Approaching allowances in a consistently constructive way allows you to instill decision-making wisdom in your children rather than controlling them. An allowance also helps your children gain a well-balanced perspective about money, encouraging saving, investing and giving, in addition to spending.
Awareness of the values you model
Your children are tuned in to your purchasing decisions. The ways you spend your money sends messages to your children about your values and life priorities. Children also notice how you spend your time and your actions can unintentionally send messages you did not intend your children to receive. When you miss opportunities to spend time with your children in order to put in extra hours at work or manage your money, you are sending a message that money is more important than family. Financially intelligent parents are highly conscious of their spending habits, as well as how they balance their work and family time, and the values they communicate.
Moderate extreme money tendencies
Extreme money tendencies can evolve into money disorders which cause chaos within your family and send the wrong messages to your children. There are several types of money disorders, ranging from excessive shopping to racking up credit card debt to excessive frugality. Regardless of the disorder, extreme money tendencies cause your children to experience confusion and insecurity in their lives. Financially intelligent parents learn to recognize and moderate extreme money behaviors.
Talking about the tough topics
Parents avoid talking about financial topics that make them uncomfortable or that seem too complicated. Although you model good money behaviors in certain ways, unless you compliment these behaviors with good money conversations, you are not being as effective as you could be. Financially intelligent parents recognize teachable times each day that give you and your children the opportunity to talk about financial issues. You should welcome these opportunities, as difficult as they are, to discuss and reflect on financial decisions.

Eileen Gallo, Ph.D., and Jon Gallo, J.D. are experts on children, families and money, and the authors of The Financially Intelligent Parent: 8 Steps to Raising Successful, Generous, Responsible Children (New American Library/Penguin Group). For more financially intelligent parenting tips and tools, visit http://www.FIParent.com.

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