Teach your kids the mysteries of money

I saw a young mother in the supermarket recently with a toddler perched in her shopping cart and another child walking alongside the cart. Before starting down the aisles, she stopped briefly at the automated teller machine, inserted her card, punched in a few numbers and grabbed the cash as it spit out of the slot. The children were watching.

I wondered if these young children would ever learn that their mom worked a full-time job, paid taxes and even set money aside for their college education ## all before she could withdraw the cash to pay for the groceries. That evening, as I watched the ecstatic winner of a $100 million lottery on the evening news report, I thought about the many children who would grow up believing that having money is a matter of luck and winning numbers.

In the old days, we used to tease our children that "money doesn't grow on trees." Now we have to teach them that money doesn't come from ATMs or lottery tickets. Are you doing your part to educate your children and remind their parents that children need to learn the value of money? Here are seven ways you can help.

1. Treat your own money with respect and let your children share that respect.
If you bend down to pick up a penny, your children learn that even small amounts are to be treasured. If you carefully consider the price of a purchase instead of just saying, "Charge it," you instill a sense of value in those watchful eyes. If you count your change instead of stuffing it in your wallet, your children learn to be careful with their cash.

2. Let your children make money decisions from an early age.
In many families, an allowance is merely a way of transferring enough cash to avoid daily handouts. But if you sit down and work out a budget for your child based on necessities such as school lunch money and bus fare, you can build in enough extra for some discretionary choices. Depending on the child's age, a few extra dollars of allowance can let the child learn the benefit of saving for a big purchase vs. spending on small stuff today.

3. Give your child an attractive alternative to spending.
Many local banks offer accounts specifically aimed at children that let them add a few dollars at a time. Explain that the bank pays you "rent" to use the money ## and that the interest builds up and earns more interest. In fact, if you start out with a $100 deposit and let the child add to it, the picture becomes clearer. My son had a savings account from the time he could reach the bank teller's counter. By the time he was 12, he noticed he could get a higher rate at a different bank! Some of these banks are now set up on the Internet, such as the Young Americans Education Foundation & Bank, which focuses on teaching children the value of money and how interest can make it grow. (A link to the site is on the left.)

4. Make sure your child understands the connection between work and paychecks and taxes.
While I don't advocate sharing the entire family budget with your children, it's never too early for them to watch you use your Microsoft Money software to sort out your spending and investing decisions. Let them know that the hours you work translate into the dollars you can spend. And be sure to give them some idea that the government takes about one-third of your earnings in taxes!

5. When your child is at an appropriate age, encourage him or her to get some work experience.
It could be as simple as walking the neighbor's dog or baby-sitting. Later on, it could be bagging groceries at the local store or working in a restaurant. By the time your child receives a paycheck, minus taxes, the concept of spendable income vs. savings will become very real.

6. Make investments for children in stocks or mutual funds ## and explain them to your children.
If young children are aware enough to be targeted for marketing by big consumer companies, they can certainly recognize and distinguish between brands. And if there are brands they use and like, by all means invest in a few shares of stock. Then they'll get annual reports with pictures of the company's products, and perhaps feel some pride of ownership. There are several mutual funds that are designed to appeal to children ## while still concentrating on investment performance. One, the Stein Roe Young Investor Fund (SRYIX), has been among the top performers, while sending information and activity kits to teach children about investing.

7. Get involved in school curriculum choices that teach the value of work and money.
Junior Achievement reaches children throughout the country, in courses designed for kindergarten through high school, to educate them about community, the workplace environment, entrepreneurship and investing. But your local Junior Achievement organization needs community volunteers to teach those prepared courses. Giving just an hour or two a week of your time spreads the message of the value of work to an entire generation. A link to the Junior Achievement Web site is on the left.

Always recognize that there's a difference between teaching material values ## and creating a materialist. Money has an important place in life, and it's different for every adult. For some, it's only a path to consumption; for others, it allows for charity and generosity. A healthy balance is the goal of a sound education about money.

Finally, a reminder: Children's attitudes about money are based on the things they learn and the genes they inherit. Many parents have noticed that two siblings raised in the same household have vastly different approaches to dealing with money. One child may hoard his or her allowance, while the other is a spendthrift. So while you can't completely mold a child's perspective, you can educate a young person to respect money and the hard work it represents.

Article written By Terry Savage

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