Book Smart or Money Smart?
Teaching kids to manage money

As summer vacations come to an end and the weather begins to cool, back-to-school time draws near. It's a time that many children eagerly anticipate -- catching up with old friends, making new ones and settling into a new daily routine. It's also a good reminder for parents about the importance of raising children who are money smart, as well as book smart.

Money management skills are not something children automatically learn once they become adults. A child learns about money in several ways:

• From what they hear and see around the house
• From experience
• From adult guidance

Training At Home is Essential
At a fairly early age, children can develop good and bad buying habits. With a parent's help, they learn to plan their spending, compare prices, and save money. Parents should explain to their children that spending money without getting something of value in return is wasting money. Also, parents can teach them the art of stretching a dollar and the importance of taking care of their personal belongings to make them last longer. Here are some suggestions for teaching children money management at any age.

Ages 3 to 6 Years

• Before children can handle money, they must understand simple numbers and know a penny from a nickel or dime. Introduce coins by letting them handle money when buying small items.
  
  
• At this age, children are usually not interested in allowances, but you may give them money from time to time for their piggy banks.
  
  
• At 5 or 6, give your child a quarter and explain it will buy a piece of candy or a toy, but not both. Money management involves choices and, even at this age, when children spend they need freedom of choice.
  

Ages 7 to 12 Years

• Children may typically begin to receive an allowance at about age seven.
  
  
• Help your child use the allowance wisely by putting part of it in different envelopes or other containers for different purposes. Include one for savings.
  
  
• Encourage children to save by showing them some items cost more than their allowance and they will have to save until they have enough.
  

Ages 13 to 18 Years

• In their early teens, boys and girls experience managing more money and making more decisions. Allowances should be given in a weekly lump sum. You can give your teenagers more money as long as they are willing to do additional work around the house. By doing so you are teaching them the importance of planning, wise spending, and setting limits.
  
  
• Teenagers should be able to decide, to a large extent, how they will spend their money. They should assume more of the responsibility for buying their own clothes, paying for their own car and contributing to a savings account. To do this, you should increase their allowance enough to cover their new responsibilities.
  
  
• It is very important for teenagers to have a savings plan. Talk over their savings plan with them to encourage them to save for more expensive items, or for that unexpected purchase.
  
  
• Share with teenagers the responsibility for spending part of the family's budget. Have them plan meals or take them on your weekly shopping trip. Family budgeting will teach them about the cost of living and the value of money.
  

In general, teach your children to SPEND without being wasteful, to SAVE without being stingy, and to SHARE what they have with others. Teach them to value money for what it can do -- good and bad -- and not as an item in itself. If you train your children in sound financial habits now, they will be much better prepared to solve the difficult challenges when they are adults.

For more information, check out the video, Teaching Children Fiscal Responsibility, at www.greenpath.com/tools-and-tips/videos/fast-forward-on-finances.htm.