Money Skills for Financially Literate Children of All Ages
Some guidelines for teaching children about money:
* Preschool: By the time they’re toilet-trained, most children are already familiar with the rudimentary workings of money--that it’s needed to buy stuff and that some coins and bills will buy more stuff than others. Young children are also beginning to pick up attitudes about money from their parents as they observe them shopping for groceries, paying bills or just talking at dinner. Bonnie Drew, author of “Money Skills: 101 Activities to Teach Your Child About Money,” recommends making a game out of teaching preschoolers money skills, like creating a pretend toy store with a play cash register and play money, or making picture flash cards of money.
* Grade school: Most children are ready for weekly allowances when they start school. Experts discourage tying allowances to regular household chores but encourage paying extra for additional work. How much is doled out depends on a child’s needs and the household income. According to Zillions, the kids’ version of Consumer Reports magazine, the average is a dollar a week for each grade a child is in. Experts suggest paying in single bills or coins. Drew suggests having the child divide an allowance into three parts for spending, saving and sharing. Neale S. Godfrey, author of “The Kids’ Money Book,” proposes slightly different categories--spending, short-term saving and long-term saving--and even recommends setting some money aside for “taxes.”
* Junior high and high school: By age 12, many children are earning money outside the home--baby-sitting or mowing lawns, for example. Experts suggest raising allowances at this point to teach youngsters how to budget each month for things like clothes, movies and school supplies. It’s important to have them stick to that budget, they say. “They’ll learn that they can buy those expensive designer clothes, but they may not be able to buy much else,” says Godfrey. Some parents phase out allowances by the time their children turn 16 and are getting regular paychecks from part-time jobs. Teen-agers should be encouraged to open a savings account and to consider investments. Some banks offer special accounts with low fees, while a few mutual funds let investors get started for as little as $250.
* College: Living within a budget is especially important now, as many students will be out on their own for the first time. If they haven’t learned the concept by now, there are a number of self-help and personal finance books available today. Students will need to open a checking account, but experts are split on whether a credit card is necessary. Proponents say credit cards allow young adults to build a credit history while handling emergency expenses. But opponents say they only entice students to spend more than they have. Godfrey suggests getting a secured card with a $500 or $1,000 deposit that can be used for emergencies.
