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It is more important now than ever before for children to learn about money and how to prepare for their future. You may question this since your child is only one year old. Well, now is the time for parents to plan how they will teach their kids about being responsible with money.
My parents never taught me about money so I had to learn the hard way through years of trial and error, mostly error. As I approach retirement I realize that I am not financially ready. Many from my generation are in the same boat. That is the main reason so many are still working well past retirement age. It is becoming more difficult for everyone to make ends meet. Do you want your children facing difficult financial times?
On this site we have a topic entitled, Do Your Kids Enjoy Doing Chores?. I believe you should pay your child to do chores. The reason for this, it can teach them to be responsible with their money. Of course it can also teach them that when they become an adult they will need to work if they want to get paid.
This idea of paying your child for their chores is worthless if parents don't teach them how to save the money they make. The articles and the websites listed below will get you started on learning how and when to teach a child about money. Children need to learn that saving at much money as possible is the only way they will be able to retire with financial security. The money they save can go into a savings account, a retire fund or even in the stock market. When the time comes to make any of these choices they will need to know all they can to make wise choices.
It is a wise parent who prepares their children for the future.
And a foolish parent who teaches them nothing.
Teaching Kids About Money: Goals by Age
You're probably no stranger to setting goals. You may have had the goal of graduating from college or buying a home. Maybe you've achieved your goals; maybe you're still working on them.
You may not have thought about teaching money matters to your kids in terms of goals, but it helps to do so. Setting goals helps you measure your (and your child's) progress.
Set goals that you want to see your child achieve. The goals you now decide on depend in part on the age of your child and what she already knows. You can always adjust your personal goals as you go along.
Experts differ on what they believe to be minimum achievements for a particular age. One expert suggested that a child's money education should start as soon as he's old enough not to eat the money. Another expert favored savings plans for preschoolers.
You, of course, can set any goals you want. Here are some you might consider as minimum achievements for a child's age. When your child completes an age category, test his money knowledge to make sure that he has mastered the goals you've set.
- Ask him questions. See whether his answers show that he has achieved the different goals.
- Watch her in action. Doing is even more powerful than saying. Put her to the test to see if she succeeds.
Goals for Kids Age 6 to 10
Kids starting elementary school are outgrowing the myths of early childhoodthe tooth fairy, the Easter bunny, and even Santa Claus. It's time to start learning the realities of money.
If your kid falls in this age category (essentially elementary school age), you want to be sure that she masters certain basic money concepts:
- Identifying money. Make sure that she knows the difference between a nickel and quarter.
- Making change. Make sure that she knows how to present enough money to cover a purchase and to count her change.
- Being responsible for money. If she loses the dollar that was in her pocket, she has to know that it's her loss (you won't replace it). This will teach her to be more careful in carrying money.
- Understanding that things cost money. From the candy she eyes at the supermarket checkout counter to the premium movie channels on TV, she must know that nothing comes free.
- Handling an allowance. Make sure that she learns to live with the allowance she's given and to meet any expectations for it that you might set. For example, this may include a modest savings plan to pay for things she wants.
Goals for Kids Age 11 to 13
As your child gets older (essentially middle school age), his responsibilities when it comes to money should increase. Your expectations of his money skills should also increase at this point.
Here are some things you might expect of your child at this age:
· Setting up a savings plan. As your child ages, he's better able to set goals that are more far-reaching. For example, he might want to save for a summer experiencea day at Great Adventure or Six Flags.
· Setting up a savings account. The old piggy bank may have been okay in elementary school, but once his savings grows, it's time to bank it in a commercial institution.
· Giving to charity. Even if it's only a little money, it's about time to learn about giving to worthy causes.
· Shopping wisely. Children this age may spend time at the mall on their own; they need to know about shopping for value.
Goals for Youths Age 14 to 18
By this age (essentially high school age), your child already has one foot out the door. You want her to have a firm grasp of certain money essentials because it may be only a matter of a few yearsor even monthsbefore she's away from your watchful eye.
Here are some things that should be mastered by a youth in this age group:
· Saving for college. College is an investment worth makingand for this age group, it's just around the corner.
· Getting a job. Nothing teaches about the value of a dollar as fast as working for it.
· Learning about investments. Your child may not yet have the bucks to buy a Treasury bill or 100 shares of Microsoft, but it's important that she understand at this age how these investments differ and what investing in general can do for her.
· Understanding what a budget is all about. Money isn't infinite (unless you've been supplying it without restriction), so she should know how to make a budget and allocate the money she has to spend among the things she needs.
· Learning about credit cards and other debt. Whether your child is ready for her own credit card is not the criterion for teaching about debt and how to handle it. It's never too early to learn the perils of having too much debt and how that can happen.
· Understanding about the different kinds of taxes. If your child already had a job, she knows that Social Security and Medicare taxes are withheld from her paycheck. When shopping in most states, she has paid sales taxes on things she has bought. And if she earns enough or has investments, she'll pay income taxes as well.
The above article was borrowed from: http://www.life.familyeducation.com/money-and-kids/money/47957.html?detoured=1
Please visit their website, http://www.life.familyeducation.com/money-and-kids/personal-finance/34481.html, for more on teaching children about money.
15 Ways to Teach Kids About Money
Brought to you by National PTA®
by Paul Richard
Introducing Kids to Money
Money gives people -- both young and old -- decision-making opportunities. Educating, motivating, and empowering children to become regular savers and investors will enable them to keep more of the money they earn and do more with the money they spend. Everyday spending decisions can have a far more negative impact on children's financial futures than any investment decisions they may ever make. Here are 15 simple ways to help educate children about personal finance and managing money:
1. As soon as children can count, introduce them to money. Take an active role in providing them with information. Observation and repetition are two important ways children learn.
2. Communicate with children as they grow about your values concerning money --- how to save it, how to make it grow, and most importantly, how to spend it wisely.
3. Help children learn the differences between needs, wants, and wishes. This will prepare them for making good spending decisions in the future.
4. Setting goals is fundamental to learning the value of money and saving. Young or old, people rarely reach goals they haven't set. Nearly every toy or other item children ask their parents to buy them can become the object of a goal-setting session. Such goal-setting helps children learn to become responsible for themselves.
5. Introduce children to the value of saving versus spending. Explain and demonstrate the concept of earning interest income on savings. Consider paying interest on money children save at home; children can help calculate the interest and see how fast money accumulates through the power of compound interest. Later on, they also will realize that the quickest way to a good credit rating is a history of regular, successful savings. Some parents even offer to match what children save on their own.
Allowance and Spending Decisions
6. When giving children an allowance, give them the money in denominations that encourage saving. If the amount is $5, give them 5-1-dollar bills and encourage that at least one dollar be set aside in savings. (Saving $5 a week at 6 percent interest compounded quarterly will total about $266 after a year, $1,503 after 5 years, and $3,527 after 10 years!)
7. Take children to a credit union or bank to open their own savings accounts. Beginning the regular savings habit early is one of the keys to savings success. Remember, don't refuse them when they want to withdraw a portion of their savings for a purchase--This may discourage them from saving at all. You can also introduce children to U.S. savings bonds. Bonds are still a good value, costing one-half their face value and earning interest that in some instances will be tax-free if used for a college education. Perhaps more importantly, when given as a gift, bonds will not be spent immediately, reinforcing saving and goal-setting lessons.
8. Keeping good records of money saved, invested, or spent is another important skill young people must learn. To make it easy, use 12 envelopes, 1 for each month, with a larger envelope to hold all the envelopes for the year. Establish this system for each child. Encourage children to place receipts from all purchases in the envelopes and keep notes on what they do with their money.
9. Use regular shopping trips as opportunities to teach children the value of money. Going to the grocery store is often a child's first spending
experience. About a third of our take-home pay is spent on grocery and household items. Spending smarter at the grocery store (using coupons,
shopping sales, comparing unit prices) can save more than $1,800 a year for a family of four. To help young people understand this lesson,
demonstrate how to plan economical meals, avoid waste, and use leftovers efficiently. When you take children to other kinds of stores, explain how to plan purchases in advance and make unit-price comparisons. Show them how to check for value, quality, repairability, warranty, and other
consumer concerns. Spending money can be fun and very productive when spending is well-planned. Unplanned spending, as a rule, usually
results in 20-30 percent of our money being wasted because we obtain poor value with our purchases.
10. Allow young people to make spending decisions. Whether good or poor, they will learn from their spending choices. You can then initiate an
open discussion of spending pros and cons before more spending takes place. Encourage them to use common sense when buying. This
means doing research before making major purchases, waiting for the right time to buy, and using the "spending-by-choice" technique. This
technique involves selecting at least three other things the money could be spent on setting aside money for one of the items, and then making a
choice of which item to purchase.
11. Show children how to evaluate TV, radio, and print ads for products. Will a product really perform and do what the commercials say? Is a
price offered truly a sale price? Are alternative products available that will do a better job, perhaps for less cost, or offer better value? Remind
them that if something sounds too good to be true, it usually is.
12. Alert children to the dangers of borrowing and paying interest. If you charge interest on small loans you make to them, they will learn
quickly how expensive it is to rent someone else's money for a specified period of time. For instance, paying for a $499 TV over 18 months at
$31.85 a month at 18.8 percent interest means the buyer really pays about $575.
13. When using a credit card at a restaurant, take the opportunity to teach children about how credit cards work. Explain to children how
to verify the charges, how to calculate the tip, and how to guard against credit card fraud.
14. Be cautious about making credit cards available to young people, even when they are entering college. Credit cards have a message:
"spend!" Some students report using the cards for cash advances and also to meet everyday needs, instead of for emergencies (as originally
planned). Many of those same students find themselves having to cut back on classes to fit in part-time jobs just to pay for their credit card
15. Establish a regular schedule for family discussions about finances. This is especially helpful to younger children--it can be the time
when they tote up their savings and receive interest. Other discussion topics should include the difference between cash, checks, and
credit cards; wise spending habits; how to avoid the use of credit; and the advantages of saving and investment growth. With teenagers, it's also
useful to discuss what's happening with the national and local economies, how to economize at home, and alternatives to spending money. All of
this information will be important as they take on more responsibility for their own financial well-being.
Adapted from "Dollars and Sense," in the April 1999 issue of Our Children, the official magazine of the National PTA®.
Paul Richard is executive vice president of the National Center for Finance Education (NCFE), a nonprofit organization dedicated to helping people learn to manage money.
The above article was borrowed from: http://www.life.familyeducation.com/money-and-kids/parenting/36332.html?detoured=1
Please visit their website, http://www.life.familyeducation.com/money-and-kids/personal-finance/34481.html, for more on teaching children about money.
Websites to help parents teach their children about money.
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