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Dollars and Sense: Teaching Kids Smart Money Habits

How are some people “naturally” great with their personal finance while others are horrible?

 
While only some of us are parents, all of us were children, and we first developed our understanding of money and how to use it from our parents when we were young. Between trips to soccer practice and cello lessons, helping with English homework and preparing homecooked meals, our parents struggled to find time to teach us good money habits. Our lives are no less busy today. But we at FABB hope this collection of links will make it easier for you to help your children develop a keen sense of financial responsibility and feel empowered rather than limited by their finances.

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Cornerstones: An Overview of the Basics

Take a look at Teaching Kids About Money by Scott Reeves for Forbes.com.

While it seems a bit extreme to “give your child a ledger and a dozen No. 2 pencils for a birthday present to encourage more detailed record keeping,” the message is clear: early exposure to money through a variety of experiences can get your kids off to a good start.  This article discusses extraneous purchases, the development of financial curiosity through your child’s interests, and the importance of philanthropy and part-time jobs in your children’s financial experience.  Teaching Kids About Money is a suggested read for those who need a good place to review the basics…

…but don’t stop there!!
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Personal Experiences: Adverts, SATs, and That Pesky 50 Cents

Those solid, time-tested lessons about money are best paired with individual insight and thoughtfulness about the matter. Here are a few articles written by parents who successfully teach their children about money.
 
The husband over at NotMadeOfMoney, extends his children’s education beyond money alone, noting that we can talk to our children about the impact of advertisement on our purchasing.

Discuss the ads your kids see on television with them. In order to help the kids make savvy choices with their money they need to understand the ploys that ad agencies use. Point out the small print on sales offers. Talk about the unexpected costs that come with different purchases.

I’d like to take this idea a step further: the internet also offers opportunities to talk with your children about advertisement, a discussion that fits nicely alongside that important conversation about “safe surfing.”
 
In a guest post on GetRichSlowly, Nickel from FiveCentNickel describes how he teaches his four kids about money and offers anecdotal descriptions of the practical limitations parents face when teaching kids about money.

At first, we paid our kids $0.50 per week per year of age, which meant that our then seven year old received $3.50/week, and our five year old received $2.50/week. This worked well, but the weekly aspect of our allowance system was somewhat problematic.

With four kids running around the house, a full-time job, and a side business, time has a way of getting away from a person, and all too often we found that we were forgetting to pay their allowance (despite their persistent reminders) for weeks on end.

We’ve since moved to a monthly system wherein we pay each child $3/month per year of age. Since transitioning to monthly payments, things have really smoothed out. We typically sit down on the first weekend of the month to dole out their allowance, and the kids have also had to learn a bit more about budgeting, as they’re responsible for making their money last for four weeks at a time.

Parents must not over-extend themselves when teaching children about money or else they will tire out and set a bad example. Read Nickel’s full post to learn how he simplified his stressful allowance system while teaching his kids the value of long-term planning. (I encourage you to read the whole post; he’s an outstanding example to follow.)
 
Trisha Wagner from Destroydebt.com guest-posts at TheDigeratiLife and pushes forward a provocative idea about credit:

At some point, your child will get older and will be ready for more complex lessons. You can start by sitting down with your child and showing him (or her) the basic elements of a credit report. In the aftermath of the current economic downturn, your credit score might very well become more important than your SAT score.

There’s no doubt that your child’s credit score will be important later in life. Because credit is a beast beyond the basic lessons of money management, it deserves unique attention, and taking up Trisha’s strong tone may help you initiate a fruitful conversation with your kids.


Learning how to use money is difficult, not least of all because of the complexity of basic money math. We must give our children the time to learn both the lessons we can teach them and the lessons they can learn through their own experience. We will succeed when we start them off early, expose them gradually to the complexity of financial management, and, most of all, give them great examples to follow.

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Fun and Games: Ways to Play With Money
(Additional Links)
 
Cyberchase is an online game from PBS that appeals to 2nd – 4th graders. Your child’s character must be hired for jobs in order to earn the money necessary for traveling, buying various items, and ultimately winning the game. It’s no World of Warcraft, but the vivid graphics alongside the math, spelling, and statistics challenges are so fun that parents will want to help their kids save the Cyberworld.

ControlYourCredit.gov may be less about adventure, but your older children will enjoy the highly-interactive, noir  environment of The Bad Credit Hotel and the crotchety old man who lives there while they learn about the laws and benefits of credit. (Note: this site requires a high bandwidth).

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