Teaching Children Money Smarts
Do your children understand the value of a dollar?
Learning how to manage money early is a lesson that will be essential
throughout their lives, according to the Iowa Society of Certified Public
Accountants. Here are some tips that you can use to ensure that even the
youngest children learn how to save and spend wisely.
Give them responsibility
Most children begin to learn about money through their allowances. When you
give your children a regular allowance and let them make decisions on how to
spend it, you’re providing them with an opportunity to budget and take
responsibility for their own expenses. Each child will be ready for an
allowance at a different age, but 5 or 6 is often a good time to start. An
allowance is a great introduction to how money works in the real world. Your
children may not always make the right decisions, but they will learn from
their mistakes now rather than when they are adults.
Allowance options
There are many ways an allowance can work. Some parents pay one amount every
week, while other children receive money in exchange for certain chores or
accomplishments. Some families require children to save some part of their
allowance, while others leave this decision up to the child. You should
explain to your children what they are expected to pay for with the
allowance. It may be meant to cover splurge items, such as new toys or pizza
after school with friends, or you might ask them to chip in on other
expenditures, such as equipment they will need for a sports team. On all of
these questions, there is no one correct answer, so you can pick the
approach that’s right for your family.
Encourage savings
Whether you require your children to save some part of their allowance or
not, it’s a good idea to open savings accounts for them and suggest that
they set a small amount aside whenever they receive it, including birthday
gifts or money they earn from summer jobs. Of course, savings aren’t
meaningful unless they have something to save for. When your child is
dreaming of an expensive electronic gadget or some other pricey item,
explain that he or she can have it–when there’s enough cash in the savings
account to buy it. This will teach your children the value of saving and
teach them an appreciation of money and the things it can buy.
Get information
The CPA profession has created several tools that you can use to teach your
children about money. The 360 Degrees of Financial Literacy program, for
example, contains a wealth of resources, including articles on teaching your
children about different kinds of investments and helping teens manage their
summer earnings. To learn more, visit
www.360financialliteracy.org.
Young adults who are just beginning their careers
may also need good advice on managing money. For them, CPAs have created the
Feed the Pig campaign. Turn to
www.feedthepig.org for articles, podcasts, tools, and tips designed
to keep young earners on track and help them build a sound financial future.
Have more questions about your family’s financial
situation? Your local CPA can help. Turn to him or her for advice on
introducing financial issues to your children and on the best ways to manage
your money. To access “Find a CPA” on the web, go to
www.findanIowaCPA.com.
