Years ago while working in the school system observing and interacting with elementary-age students, it became painfully clear that with each new generation kids were becoming more materialistic and brand conscience and less aware of basic concepts of money and its value. While it would be easy to single out the school systems and blame them for not teaching such concepts as saving, budgeting and overall money management, the blame here really starts at home.Why Kids Don’t Value MoneyIn an effort to provide “a better life” for your kids, many parents have provided (and in some cases, over provided) without counter balancing with lessons on the value of money. One 11 year-old boy reported that “If it’s something I really want, and I want it at that moment, I’ll just pay whatever price it is. I’m not patient enough to shop around.” Huh, I wonder where he gets that from. Kids watch as you retrieve money from ATM machines, push credit cards, and whip out checkbooks to support spending habits even when they just heard you announce that you “don’t have it to spend.” Experts agree that kids learn their spending habits by observing their parents, everyday. Therefore, kids are often left with a false understanding of the value of money, and usually lack respect for it. I once heard someone say “a person who doesn’t respect money won’t have it for long.”In 2000, children 12 years and under, directly and indirectly, influenced the household spending of over $600 billion annually…yes I said billion. That was 8 years ago. Meanwhile, corporations have continued to increase their focus on your kids, and in turn you have continued to be loyal consumers increasing their bottom line; often in the name of “providing a better life” for your child. While some of these expenses are legitimate use of income and smart buys, many are not.So here’s the self-reflecting question: If you are raising a generation of spenders, rather than savers, then are you really providing a better life for your kids? Are you truly preparing them for financial greatness…a better financial life, or are you inhibiting their financial growth by potentially setting them up for a debt-filled future that will be built on the foundation of bad credit and poor spending habits developed early in life?What Should You Be TeachingSuze Orman told O Magazine "Everyone takes parenting seriously. But while you're teaching your children moral lessons, you may fail to teach them financial lessons. Kids overhear you and your spouse arguing about money, and they feel your anxiety as you deal with the monthly expenses. Good parents are financially responsible parents. Good parents don't spend what they don't have, they save for retirement, and they teach their kids that it requires money to pay for the electricity that turns on the TV."While, this is not meant to be a bashing session of parents, it is however meant to be a wake-up call to parents. Charles Schwab & Co. recently did an online survey where they found that a whopping 70% of parents had taught their kids how to do laundry, but a meager 34% had shown them how to balance a checkbook. Surprisingly, I can relate to this survey. Although I remember having a savings account as a child, I was actually in college before a nice lady at my bank explained how a checking account differs from a savings account and the proper way to balance a checkbook. This happened only after I had attempted to write checks against money in the savings account. The bank assumed that I already knew, my parents assumed that the bank would explain, and I thought I knew it all. The lesson to be learned here is not to assume that your kids will learn money management skills out in the world.Taking into consideration the current economic situation with Americans at all income levels reviewing their spending habits, nearly 2 out of 3 consumers or 64% intend to reduce indulgent spending in 2008, according to a new survey by HSBC Bank USA. Four out of 5 want to increase the amount they save. Now is as good a time as any to start conducting these value-added conversations with your kids concerning money management. Teaching kids the importance and value of money is essential; teaching it at an early age is crucial to their financial future. And make no mistake, it is up to you to teach them and lead by example. It’s never too early to start teaching and demonstrating good money habits to your kids, providing the building blocks to make good financial decisions throughout their lives.Just remember, your efforts will be more effective if you practice what you preach. Generally, financially-savvy kids come from financially-savvy families. It’s like sending your child to church every Sunday while you stay home in bed. The lesson doesn’t go very far if it’s seen as more talk then action on mom and dad’s end. Susan Beacham, Co-Founder and CEO of Money Savvy Generation says, “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.”Where’s the AllowanceIn my workshops, I instruct kids to divide any money they receive into three categories; save 50% (in an interest-bearing savings account), donate 10% to church or charity, and they can use the remaining 40% for smart spending. Though this savings plan will need to be modified as children grow into young adults with bills and responsibilities, they will still be accustom to working with a solid savings plan, nonetheless.Despite the billions of dollars parents are spending on their kids annually, a surprisingly, 83% of parents don't give their kids allowances, according to a recent survey on Parenting's MomConnection. Think about it. You are teaching your kids that financial reward comes from doing nothing. An allowance, on the other hand, is the closest thing kids have to earned income. It teaches the concept of working for pay; and may even surface a new found respect for mom and dad’s hard earned money. Even 50 cents a week per year of your child's age ($2 a week for a 4-year-old, for instance) can be a great teaching tool.There is no set age limit to when a child can begin to receive an allowance; each matures differently. However, as a rule of thumb I usually say if a child knows the difference between a dime and a dollar, and they are a frequent user of “Mommy, can you buy me…”, or “Daddy, can you buy me”, then it’s time to start your financial education parenting plan in preparation for their financial future.Laying the FoundationDon’t worry if your kids don’t grasp the concepts right away. Like many things you teach your children, they may not understand the concepts or reasoning behind it at that time, but at least you laid the foundation for growth. Talk to them about their long-term and short-term savings goals – just be sure that they are age-appropriate for each child. Go through the household bills with the kids. Take them to the bank when you go to make deposits. Encourage other family members to participate in their financial education by contributing to their bank account instead of giving toys and clothes for every occasion.Money management doesn’t have to be a four letter word in your family. Help your kids start saving, investing, and budgeting their money from a young age and they'll always be ahead of the game.My Top 10 Financial Tips for Parents1. It’s never too early to start teaching and demonstrating good money habits to your kids.2. Lead by example. Generally financially-savvy kids come from financially-savvy families.3. Be consistent in maintaining your savings plan and assisting your kids with theirs.4. An allowance is a great teaching tool.5. Have your kids open a bank account and do away with the piggy bank.6. Talk at an age-appropriate level to your kids about family money management topics (i.e. bills, long-term savings goals, taxes, etc.).7. Encourage entrepreneurial activities by surrounding your child with books like Hillary’s BIG Business Adventure, games like Monopoly and PayDay, and movies like The Baby-Sitter Club (1995) to encourage their inner-entrepreneur.8. Encourage other family members to participate in your kid’s financial education by contributing to their bank account.9. Encourage your kid’s school to introduce money management and entrepreneurial programs to the students.10. Make it fun!- Lori Nelson, President of Nelson Publishing, LLC and the Author of Hillary’s BIG Business Adventure, which introduces elementary-aged children to basic business and financial concepts. www.Nelson-Publishing.com
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