Raise a Money Smart Kid
Develop Critical Habits in Allowance, Budget, Bank, Save and Spend
Feb 28, 2009
The lives of adults have become so technologically advanced that children are missing out on one valuable aspect of their education: handling money. Most adults are swiping debit and credit cards left and right. They use ATM machines and sign up for direct deposits. They use the internet to pay bills. They never touch money.
Parents are modeling these behaviors and their children never get to see or understand the accountability behind these actions. While the nation is facing an economic crisis, tweens are on the verge of financial illiteracy.
What better time for both adults and children take action? "Families can make some small changes that will add up over time," says Carl George, CPA and chair of the AICPA National Financial Literacy Commission. "By getting parents involved, children will develop a routine that will become permanent."
George advises that families develop some critical habits:
Earning an Allowance
Just as parents have to work to earn their money, allowance should be earned. Parents need to be consistent with this on a weekly or monthly basis.
Budgeting Money
Children need to learn to allocate money. Funds should be set aside for spending, gifts, savings and charity.
Banking in Person
Children should open up a savings account. They should go into the bank with their bills and coins to make deposits and withdrawals and learn how to keep track of their spending.
Saving for Long-Term and Short-Term
Boys and girls should be required to save a percentage of their allowance. They can set aside some funds for a short-term goal and other funds for the long-term.
Spending Wisely
Don't buy something if you cannot afford it. If it is not in the plan, take some time to think about the purchase. Children should be advised to avoid impulse buys and buying just because there is money in their pockets.
Work Together as a Family
Ready to put the plan into action? Feed the pig – the piggy bank, that is. The Feed The Pig For Tweens Program offers this plan for families to save together toward a financial goal:
Pick a short term goal that everyone wants. It could be a family outing to enjoy ice cream sundaes, a night out to the movies, a new item for the home, a financial gift to a favorite charity, or something else chosen together.
Map out the plan to save the money, including the total amount that is needed for the goal and how much needs to be saved each week to reach that goal. Use cash in a piggy bank so it is visible to the children. Let them count it out regularly to see the progress.
Let the children handle the transactions when enjoying the big moment while the parents sit back and take delight in their joy of reaching a goal.
Source:
Personal interview with Carl George, CPA and chair of the AICPA National Financial Literacy Commission, November 2008
