Money Management ABCs

With reduced family budgets and the crush of holiday shopping upon us, you may be in the perfect frame of mind to start teaching your children about money—and how to manage it.

Role-playing and pretend play are ways youngsters learn, and they love it. When you take the kids to supermarket, they watch what you do when you shop, and they want to imitate it. Playing “grocery store” is one of the best ways to start your youngest on a path to understanding how money works. How many pennies are in a nickel, how many nickels does it take to make a dollar? Learning Resources Teaching Cash Register helps kids learn the different denominations of coins and currency, and how making change is a lesson in adding and subtracting. The total is adjusted for using a coupon. (Ages 3 & Up, Learning Resources, $44.95).

If your kids are six or older, it’s time to start teaching them basic money concepts. And yes, it is up to you to teach them. Most schools don’t have “money education” programs – but that’s another story. Set the groundwork at home. Teaching your kids about money at an early age gives them building blocks to make good financial decisions throughout their lives. “Becoming money-savvy is not a passive activity. If we as parents want to raise money-savvy kids, then we will need to become much more proactive in giving our kids the financial skills that they need to succeed in the real world. Even if we as parents are not as financially savvy as we need or want to be, we can still teach our children what they need to know, and perhaps learn a little ourselves in the process, without undertaking another college degree in the process” instructs Susan Beacham, a 20 year veteran of the financial world, mother of Allison and Amanda, and financial literacy teacher.

In order to help kids develop a sense of delayed gratification, learn the importance of planning for future needs and wants, and to discover that saving can be as provocative as spending, Beacham founded The Money Savvy Generation (www.moneysavvygeneration.com). Beacham, aka Mrs. Money, offers three simple but powerful credos for teaching children basic money management: Teach money choice, Teach them to set goals for those choices, Keep your money promises.

“As a parent, you need to teach your child that there are four choices for money – Save-Spend-Donate-Invest - not just one.” Says Beacham. By showing them how Mom and Dad use all the money choices, kids will want to participate in a grownup money world. “They will model their behavior after your behavior. If you use all four choices, they will use all four.” Early, consistent, habit-forming mantras about “money choice” are the first steps in educating your children about money.

Beacham developed the Money Savvy Pig (Ages 3 & Up, $14.95) to teach and illustrate the impact of four choices. A “piggy bank” with four see-through compartments: SAVE, SPEND, DONATE and INVEST, allow youngsters and parents to watch what happens as choices are made to spend or allocate money. The Money Savvy Pig includes explanations of these four choices, as well as suggestions for learning more.

Discuss with your kids how to set goals for their money. Ask them what they would like to save for in the short-term (a bike), spend money on right away (the movies), to which cause or program they’d like donate (ASPCA), and for what they’d like to save [invest] for the long-term (college). Keep in mind that the goals be age appropriate. A five or six year old may not be ready to take on the concept of long term investing, or that donating means parting with the money in their control. Try suggesting that she/he donate some no longer favorite toys to a local hospital or outgrown clothing to a shelter.

Beacham insists that parents be sure to keep money promises. If your family uses allowances, pay what is promised, and pay on time. If extra money is to be earned from shoveling snow, pay what is promised, and pay on time. Setting good examples, establishing trust and good communication are all good investments.

Give kids the opportunity to manage a little bit of their own money, and they’ll figure it out. Make kids responsible for some of their spending choices -- and make them use their own money. If you don’t, they will never learn the concept of value. Give your kids ever-increasing responsibility for making the decisions about how the limited supply of money gets spent. Remind them: It’s your money, make your choices.

If your ‘tweens and teens think you don’t know a thing, and they trust and believe only in a computer, these software programs offer a slightly different perspective about budgeting and managing money. Both Sim City 4 (Ages 12 & Up, Maxis/EA , $49.95) and Zoo Tycoon: Complete Collection (Ages 10 & Up, Microsoft Corporation, $29.95) put the kids in the management seat. Build a safe and attractive zoo and you’ll attract customers who spend money. Don’t spend your money wisely and you lose customers and animals. SimCity 4 gives kids the additional experiences of what it’s like to have the responsibility of spending taxpayers’ dollars to build schools and hospitals.

Tweens can also try opening their own pet spa, skateboard factory, or comic shop in Hot Shot Business (Ages 9 - 12 yrs., Disney Online/The Ewing Marion Kauffman Foundation), a free, online business simulation game from Disney. The hosts, Jack and Kate, provide informal financial advice on setting up the business, making marketing decisions, and building sales. Once customers start arriving, players learn to make adjustments in their plan based on real world scenarios that cause their sales and inventory to fluctuate.

Talking about money doesn’t have to be difficult or taboo. Check with the banks in your area about no-fee kids accounts. Take the kids with you each time you make a deposit.

Show them, tell them, and show them again: Save, Spend, Donate, Invest. A number of years ago, I saw a t-shirt proclaiming: “I can’t be overdrawn, I still have checks left.” Don’t let that be your family motto.