When teaching your children about money, values outrank technique

STAYING AHEAD

August 22, 1994|By JANE BRYANT QUINN

NEW YORK -- When parents set out to teach children about money, their questions center on technique. When should allowances be paid? What should I let my kids do with their savings? Should I pay them for doing chores around the house?

But technique isn't nearly as important as the values you communicate. All your cash transactions with your kids tell them what you feel about money. If you're uncomfortable talking about it, your children may not learn what you intend.

There's no right way of teaching children good values and sound financial habits. Different choices suit different families, yet reach the same desirable end. What's important is for parents to hash out these issues and reach agreement between themselves. Only then can they send consistent messages to their children.

For a look at the many possibilities, try a book called Kiplinger's Money-Smart Kids (And Parents, Too)," by Janet Bodnar ($12.95 plus $2.50 shipping from Kiplinger Books at [800] 544-0155). Among the ideas that interested me:

* Pay allowances early, starting as young as 6 or 7. How large should the payment be? "Enough so that your children can squander it, but not so much that you'll be upset when they do," Bodnar advises. Surveys have shown that children who get no allowances receive roughly as much money from their parents as children who do. But those on a regular paycheck learn much more about managing money.

* Tie allowances to a budget. Ask your children to estimate what they'll be buying and set the payment accordingly. Don't underestimate their cost of living. Sodas are a lot more expensive than when you were a kid.

* Many parents tie allowances to chores. Some put price tags on specific jobs and pay for performance every week; some provide basic pay plus extra money for doing certain chores; some give weekly pay with a side agreement on what the child is expected to do. Your choice will depend on your principal goal. Are you teaching your children how to manage money? Or is the objective to show them that they don't get something for nothing?

* Consider a three-jar system for allocating your kids' cash. One jar for spending, one for saving, one for church or charities. Savings work best when a child has a specific objective, be it a college fund or a jacket that costs more than you're willing to pay. You might also pay "interest" on the money, by adding a nickel for every dollar left in the piggy bank every month. As for charities, many families tithe -- putting 10 percent of their income toward good causes. Children should be encouraged to choose a cause of their own.

* Treat the supermarket as a school. Give them a grocery cart, a list and $20 and see how far they can make the money stretch. Send them searching the aisles for goods that you have cents-off coupons for. Ask them to pick the best buys.

* Don't lie to your kids. Make a clear distinction between what you can't afford and what you don't think is worth paying for. If they still want it, let them save for it. If it violates your principles, just say no.

* By their mid-teens, start giving your kids a sense of what life really costs by having them write out the family bills for two or three months. Sit down together with the bills, and have them actually write the checks for the light, heat, mortgage, rent, phone, water and credit cards. They'll find it instructive to see how fast the bank balance drops.

* For teens and preteens who have an entrepreneurial bent, an interesting gift is The Busines$ Kit, $58.90 (including shipping) from Business Kid$ in Coral Gables, Fla. (call [800] 282-KIDS). It's the best guide I've seen to starting and running the kinds of small businesses that youngsters can master. The kids get booklets on organizing, marketing and management. There's a clear and simple guide to writing a business plan and a handbook that helps the parents coach.

Summer work is best, Bodnar advises. Jobs during the school year should play second fiddle to getting good grades. Bodnar's research suggests that 10 hours a week is enough for high-school sophomores while school is in session, and 15 hours for juniors and seniors.

But for many Americans, self-employment is the future. It's never too early to learn how to be an entrepreneur.

Jane Bryant Quinn is a syndicated columnist. Write to her at: Newsweek, 444 Madison Ave., 18th Floor, New York, N.Y., 10022.

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