Finance Board

What you say and do about money has a profound influence on your child. There are money moments every day that you can use to teach your children important skills and lessons about life. But what to say or do isn’t always obvious. Is it a good idea to pay for chores or grades? How do you help your child develop a work ethic? How do you structure an allowance to help your child learn to make choices? Why is involving your children in charity so important? Eileen and Jon Gallo, experts in the fields of children, psychology and money, provide parents with eight key behaviors that will help them raise financially responsible children:

1. Encourage a work ethic

Work ethic is a learned behavior, and parents are the best models to teach kids to acquire it. If you want your children to work hard and derive meaning and satisfaction from what they do, make sure you are modeling the right messages. Insisting your kids do their homework and help around the house does not guarantee they will grow up with a sense of accountability and a desire to achieve. Developing a work ethic in your child is a holistic process and the eight money behaviors of a financially intelligent parent are keys to this process.

2. Get your own money stories straight

Because you send your children messages about money all the time, it is imperative that both you and your spouse are on the same page when it comes to your money stories. A money story is an open, honest and personal story of your relationship with financial issues, especially as you grew up because most people’s relationship with money developed during childhood. You need to identify why you feel the way you do about money so you can send coherent and consistent messages to your kids. When both parents focus on their money stories, children receive positive messages. Getting your money stories straight does not just mean that you agree on basic issues such as allowances and college savings. It also means that both of you have agreed to identify certain basic money values you want to teach your children, such as giving is good, working hard is its own reward, and you don’t always get everything you want.

3. Facilitate financial reflection

As with most decisions kids make, when it comes to money decisions they are frequently impulsive. As a financially intelligent parent, you want to teach your children how to think in terms of choices, alternatives and consequences. This is called reflective thinking. Learning how to reflect both before and after making a decision is a great life skill, and one that is the hallmark of people who make good choices in everything from careers to relationships to investments. Financially intelligent parents teach their children to evaluate financial consequences based on available choices rather than making impulsive decisions. As a result, children recognize that there are many options available and they acquire the skill to make good choices.

4. Become a charitable family

By teaching your children that they can do more with money than spend it on themselves, you encourage them to become more compassionate and caring. By participating as a family in volunteer and community activities, you help your children develop empathy and a sense of responsibility to others. Your children will realize they have the power to make life better for others. Because children learn through modeling behavior, you have to do more than write a check to charity. You need to show your children what it means to help others. Modeling charitable behaviors, including volunteerism, can jump start your child’s empathy and desire to help others.

5. Teach financial literacy

Although it is important to teach children how to balance a checkbook and create a budget, to become truly financially literate your children must learn within a context of values and money behaviors. Your children need a combination of concrete examples, their own experiences and financial reflection. If they do not learn to behave responsibly with money as kids, they will have to learn as adults when the cost is much higher. One of the best tools to teach your children financial literacy is an allowance. Approaching allowances in a consistently constructive way allows you to instill decision-making wisdom in your children rather than controlling them. An allowance also helps your children gain a well-balanced perspective about money, encouraging saving, investing and giving, in addition to spending.

6. Awareness of the values you model

Your children are tuned in to your purchasing decisions. The ways you spend your money sends messages to your children about your values and life priorities. Children also notice how you spend your time and your actions can unintentionally send messages you did not intend your children to receive. When you miss opportunities to spend time with your children in order to put in extra hours at work or manage your money, you are sending a message that money is more important than family. Financially intelligent parents are highly conscious of their spending habits, as well as how they balance their work and family time, and the values they communicate.

7. Moderate extreme money tendencies

Extreme money tendencies can evolve into money disorders which cause chaos within your family and send the wrong messages to your children. There are several types of money disorders, ranging from excessive shopping to racking up credit card debt to excessive frugality. Regardless of the disorder, extreme money tendencies cause your children to experience confusion and insecurity in their lives. Financially intelligent parents learn to recognize and moderate extreme money behaviors.

8. Talking about the tough topics

Parents avoid talking about financial topics that make them uncomfortable or that seem too complicated. Although you model good money behaviors in certain ways, unless you compliment these behaviors with good money conversations, you are not being as effective as you could be. Financially intelligent parents recognize teachable times each day that give you and your children the opportunity to talk about financial issues. You should welcome these opportunities, as difficult as they are, to discuss and reflect on financial decisions.

A free-reprint article written by: Eileen Gallo, Ph.D., and Jon Gallo, J.D, © 2005

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Eileen Gallo, Ph.D., and Jon Gallo, J.D. are experts on children, families and money, and the authors of The Financially Intelligent Parent: 8 Steps to Raising Successful, Generous, Responsible Children (New American Library/Penguin Group). For more financially intelligent parenting tips and tools, visit http://www.FIParent.com.

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If you are like most people today, you do not have a will. The
reasons for this failure are many, with the most common being
along the lines of “I don’t have enough assets to worry about”,
“I don’t know how to write a will”, or “Lawyers charge a lot of
money”.

Here’s my answer to the last two - buy a software package that
helps you draw up your own will and follow the forms. This
software will ask you a series of questions and you supply the
answers. When you are done, you have a piece of paper ready to be
signed; witnessed and placed somewhere it can be found in the
event you die.

As for your lack of asset objection, that might be true if you
live in a cardboard box, with only the clothes on your back, as
the last surviving member of your family. If this does not
describe you, than you do have assets and you really should make
preparations for dispersing them when you die.

As you can tell from the title, this is not about your will
except to relate as to why everyone should have one. Instead,
this writing is about your children. If you are childless, keep
reading because someday you may have children. If you know you
will never have children, keep reading because someday you may be
able to use what you learned here in a discussion with someone
who has children.

The biggest reason everyone who has children must have a will is
because of the children’s guardian. Essentially, a guardianship
is an institution created and administered by the court, making
the guardian a court-appointee. However, when you name someone to
be a guardian in your will, you make it difficult for someone
else to be appointed. If you don’t name a guardian, a judge will
decide who will raise and nurture your children. Most likely,
this judge does not know your family, nor does the judge really
have the capability to know if any of your extended family
members can properly raise your child.

It is impossible to stress how important it is for parents who
die early to find the right people for the guardianship job. They
will be responsible for the upbringing of your children. You
should definitely consider things like parenting skills, values,
physical environment (apartment/farm), and religion.

Two important questions to ask (and the answers):

1. What if the best person to bring up your child physically
is not the best manager of money? While you are planning your
will and your children’s guardian, you can also plan to separate
the functions of guardianship. To do so, you first write your
will appointing a “guardian of the person” who will care for your
children physically. Then, also in your will, you name the person
whom you appoint to be the “guardian of the estate”. This
person’s job is to dole out the resources so that your children
are not a burden on the person or family taking care of them.

2. What if the guardian you select is over flowing with love
and values, but scrape the bottom of the barrel each month to
feed their own children? Everyone knows that you do certainly do
not intend to add your children to theirs and cause them undue
hardship. This leaves only one real solution.

Provide adequate financial resources for the guardian to properly
care for your children. At the least, you should provide enough
cash resources to feed and cloth your children each month until
they complete high-school. Many parents also make an effort to
provide the resources for their children to be able to go to
college.

Most likely your own asset chart is a little short for providing
the amount of cash your children will need or you want to provide
after your death, consider using life insurance. Term life
insurance to be paid into a trust is relatively inexpensive
during the years your children are at home.

If you are leaving a trust with a significant sum of money, you
may want to appoint a “guardian of the estate” to handle the
finances separate from the “guardian of the person”. This can
remove the obvious temptation if someday the guardian encounters
personal finance difficulties.

The estate guardian and the person guardian must be able to get
along, so it is important you pick the right people for these
positions. Even more important is that if you do die early, your
child will be brought up in a loving, nurturing home you have
chosen.

After all, you wouldn’t go through the difficult issues of estate
planning and guardian picking if you didn’t want the best for
your children. That best includes you making out a will, and
doing it as early as tomorrow.

Roger Sorensen is a Financial Speaker and Author and the editor of Money Basics - The Newsletter found online at the website Slave2Work.com. You can contact him through the website, read articles he has written and find his most recent book “You Don’t Own Money 2nd Edition” at the http://www.Slave2Work.com Bookstore - Roger Sorensen is a Financial Speaker and Author and the editor of Money Basics - The Newsletter found online at the website http://www.Slave2Work.com You can contact him through the website, read articles he has written and find his most recent book “You Don’t Own Money 2nd Edition” at the Slave2Work.com Bookstore - http://www.slave2work.com/products/ematerials/ebooks/ydom2ebook.html

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As a widowed/single parent, I wanted to find a way to financially educate my children and to teach them to be savers first, not over-spenders. Like most children, mine would immediately start whining about wanting everything they saw in the stores and begging me to buy those things. So I decided to start giving my children an allowance to minimize the “I want monster” when we go to stores. But, not just any old allowance!

I explained to them that each week I would give them their allowance, but not in the form of cash… but a check. We would go to the bank each week, fill out a savings deposit ticket (which they do, I supervise) and deposit most of the check. They need to give $1 per week in the offering at church; they would also need to deposit, at minimum, half of the check. The remaining portion, they could cash and spend as they like.

Now when we go errand running and they come up to me and ask if I will buy them a toy or what I call an unnecessary item, I remind them that they have their allowance money and ask them if they are willing to spend their money on that particular item. The answer is almost always “No.”

Two important points: First, the reason I give them a check for their allowance instead of cash is because cash can be spent quickly and easily. A check is not really any good until you get it to the bank and cash or deposit it. This one little trip to the bank has forced them to s-l-o-w d-o-w-n their spending thoughts and habits. Especially when they look at their savings log after the bank teller has brought down their balance after adding in their deposit. Their faces just light up when they see how much money they have saved! By the end of the first year, they both had accumulated over $200.

Second point, when I asked them why most of the time they decide against buying the item, their answer is usually, “I don’t want it that bad.” I was thrilled to see that they were learning what they wanted and didn’t want and they weren’t willing to spend money on those items! They are learning to tell the difference between their wants and needs.

With a society consumed with credit card debt, I know that this lesson with handling money will payoff for them well into their adult lives.

Copyright(c)2000
All rights reserved.

Julie D. Raque
http://www.matrixcoachingservices.com

“Look at your life up till now, if you had hired someone to manage it, would you give them a raise, or fire them? If you’d fire them, then you need Coach Raque!” Visit her website to receive a free coaching session. To learn more about Coach Raque also visit http://www.bestwishesoflouisville.com

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