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Asked & Answered
Teaching Kids the Value of Money
Q - Children today seem to want everything handed to them. They have the attitude that they are above certain jobs like flipping burgers or working at the mall. How do I teach my young child the value of a dollar and the values of responsibility and hard work before it is too late?
A - You are correct. Thanks to our commercial culture, today’s children expect to get more and give less. Teaching your children about money is very age specific. You can’t talk about budgets and the economy with a five year-old, and your teenager will just roll their eyes when you mention, well, anything. But here are three a few things you can do.
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- Live by example: Just as parents who smoke have a hard time telling their children how bad it is, parents who are spend-happy and purchasing on credit have a hard time teaching their kids about handling money. Barbie ™ even comes with her own credit card now! Whether you realize it or not, your kids are watching and learning. Our culture is all about image, so it’s not a bad idea for kids to hear their parents mention how much respect they have for those teenagers who are working the difficult jobs and earning their own money.
- Set strict limits. Children are notorious for asking and asking and asking. Why? Because eventually parents give in. Kids need to learn that “No” means “No.” You should also set spending limits, such as $50 for a pair of shoes, and let them pay anything over that amount or you could provide matching funds for large purchases (if they save $75 for a new bike, you’ll match it with another $75). Never let them pay for things before they earn the money. That just reinforces bad credit habits.
- Live by the 80-10-10 rule. The sooner you start this one, the better. Have your children divide their allowance (and eventually, their earnings) into three categories. Ten percent for savings, 10 percent for charity and 80% for spending. Your children learn self-discipline and responsibility.
- Involve your children. With young children, you can watch television with them and casually discuss the commercials and how the advertisers are trying to trick them into buying things they don’t need. The more your child knows about advertising, the less likely it will influence them. As they get older you can actually let them help you with your budget, or at least a portion (such as how much you can spend on clothing and entertainment, etc.). Most kids don’t realize how much of your paycheck goes directly towards rent, car payments, groceries, etc. If they do see you charge something at the store, then they also need to see you pay for it later. For many teens, a job probably pays about $5-$6 per hour after taxes. Let them look at purchases in terms of hours instead of dollars. “You will have to work for 20 hours just to pay for this pair of $100 shoes.”
Every child is different. Sometimes, no matter how hard you try, your child may still end up financially out of control. The real test is not how they do as teenagers, but how they do as young adults. That is when all of your positive influence will really pay off.
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Bill Pratt is the author of "Extra Credit: The 7 Things Every College Student Needs to Know About Credit, Debt & Ca$h" and "Money Made Simple". You can find tons of useful articles and calculators and have your questions about money answered at www.ExtraCreditBook.com |
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