Monday, July 6, 2009

Money and kids: Raising responsible spenders in a debt-driven world

by Jamie Richardson

The national debt is now about $11.4 trillion, according to USA Today. That is about $37,000 per person. And the number is rising quickly.

How can parents teach their kids to do better than the deep-pocketed politicians?

Here are 3 tips on teaching kids fiscal responsibility.

1. Teach the values of money early. Consider a rewards bank for good behavior. Like an earned allowance for an older child, this is the perfect starting point to let younger ones understand that things are earned, not just given freely. Give a dime for each good act, take one away for misbehavior. When the child has earned enough, take them to a dollar store and let them pick out their own reward. Let them pay the cashier to allow them the full experience of earning and buying.

2. Let them make some choices at the grocery store. For older kids, let them know how much money is allotted for the things on their breakfast or lunch table. With that money they can choose either their favorite chips, cookie, or cereal, but they only have that much money to spend on "fun" food. If the children are not old enough to read price tags, that does not eliminate them from the smart shopping experience. Give them options. Timmy can have either the name brand cereal OR the fruity candy, but not both. Or Timmy can get the store brand of both for the same price. The package may not have his favorite cartoon character on it, but he will learn to make decisions based more on flavor than advertising.

3. Cash is king. The movie Confessions of a Shopaholic gave me a whole new perspective on credit cards. The star is remembering back to her childhood and watching all the well-off ladies in the stores. She thought they were princesses and they did not even need "real money" because they had magic cards. As an adult, she chose to have 12 of those magic cards and she did not have full respect for their power until she wracked up thousands of dollars in debt that she could not afford.

And while the credit card debt per household is holding steady at about $10,000, Americans really are passing along this impression of a magic card to the next generation. For a child to truly respect money, kids need to see the power of actual money. If they see that the same money is spent on groceries and lunches, and toys and treats and that there is a limited supply of money, they catch on much faster to having a finite amount to spend.

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