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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It’s never too soon to teach your children about the value of and responsibility toward money. Here are some excellent activities to teach your children about finances, from your toddler who seems to want everything to your trendy teenager who won’t do anything unless it’s in style.

Just as bad habits are very hard to break, good habits that you teach children now will last a lifetime. If you have toddlers, now is the best time for Moms to teach them how to manage money. If you have older children don’t worryit’s not too late. Instilling positive money values now will create a wonderful foundation for your little future investors.

Follow the Leader

It’s a good idea to let your children accompany you to the bank and stores from the time they are infants so they can begin to understand the concept of money exchange. Explain to your toddlers, young children and teens exactly what you are doing and how much it costs. Allow them to see the exchange of money, checks, and credit cards between you and the merchants. Be careful to never make your children feel guilty about how much the bills cost, because that can cause damage to their self-esteem and self-worth. Try to explain each step from where you get the money, where you store it, and how you spend it so they’ll know that it’s a whole revolving process. Money management matters. Teach your children early so they can be wise about their finances.

Here Piggy, Piggy

At any given point during the day, you might see a new mother desperately prying coins from her 1-year-old’s mouth. What this Mom doesn’t realize is that maybe her child was eating the money because he had absolutely no idea what to do with it! We assume toddlers are just too young to understand money, but that’s not the case. Children love animals, so why not give your toddler a piggy of his own? And, when your toddler picks up loose change off of the floor, he will instead come straight to Mommy so he can have the treat of putting it in his bank. Once he breaks the stage of putting coins into his mouth, encourage your child to independently ‘feed’ his Piggy Bank every day so the piggy can grow and be healthy and strong. When the bank fills up, reward your smart toddler’s savings by taking it to the bank for dollar bills. Let your child buy a special treat that he’s been looking forward to with his own money. There are even toys that emulate this process with pigs that sing when kids drop plastic coins into their backs for Moms that don’t want their children to handle real money yet.

Treasure Hunt Time

This is a sure way to get children excited to learn about money matters. Save yourself time and stop breaking your back by constantly picking up coins from the floor, in the laundry room, beneath the sofa cushions, and everywhere else money disappears into. Instead of wearing yourself out, when the kids begin to look bored shout out, ‘IT’S TREASURE HUNT TIME!!’ If you feel up to it and have time, you can even come equipped with a bunch of scarves so they can dress up and pretend to be Pirates. Let your children know the safety rules of the Treasure Hunt (like, no crawling into the washing machine). Tell them they will be able to keep any money they find to save up for something special.

One Mom had a blast doing this with her 6- and 8-year-olds, and while they were busy, she had time to complete some of her own work online. However, when her daughter’s teacher called home the next day concerned that she had brought a $100 bill to school, Mom had to let the kids know that ‘finding change’ did not include going through Daddy’s pants pockets or Mommy’s purse! So, to avoid any confusion, set those rules clearly beforehand.

Now & Later

Now that your child has money, she will come up with great ways to spend it faster than she’s saving it. Let your child know that while it’s fun to spend, it can be smarter to save. One great way to teach your children about saving is by creating two containers, one for spending ‘Now’ and a separate savings container for ‘Later’. Each time your child collects money, earns money, or gets an allowance, encourage her to put money into each of the two jars - some for spending Now and some to save for Later. Once she accumulates enough in the Later jar, she’ll be able to purchase a larger, more expensive item she’s been wishing for. Assist your child in keeping a record of how much she has saved toward her goal to keep her motivated and help her stay on track. Because children need limits set for them, it may be a good idea to keep their Later savings ’safely’ placed in an unattainable spot so they won’t be tempted to spend it too soon. Allow them to keep their Now container in their room for accessibility.

For The More Mature Crowd

Your teenager probably wants it all, and it seems like they don’t care whether it breaks the Mom&Dad bank to get it. It’s not that they’re necessarily greedy and irresponsible, there’s a lot of peer pressure taking place not only at school, but also from turning on the television. Nowadays, if you don’t have the trendiest clothes or latest gadget you are simply not cool. There is a solution for Moms to help their teenagers become wiser about the way they use money while still remaining popular.

A great way to teach your teens about money is by using the good ol’ Dow Jones. When their next birthdays roll around, give the gift of allowing them to choose a stock to invest their own money in. Explain to them how the stock market works, what affects the economy indirectly and directly, and what that ticker on CNN means. Teach your children so they will understand the pros and cons of low risk vs. high risk investments. Help them make a sensible stock selection. They will feel invested and proud of their stock as the value rises and disappointed when it falls. When the newspaper arrives in the morning, you’ll be shocked at how your teens scramble for the Business section to check on their stock. Don’t be shocked if you hear your children making long-term plans from the money their stock will make. Their knowledge about the value of investing will spill over into how responsible they are with money. Their peers will be impressed with their level of maturity and you’ll be proud of their growth.

These are great ways to get your children invested in money matters. There will be many other opportunities for you to take advantage of in laying your child’s financial foundation. Remind your child that charity is important and that even a small financial contribution will help others. Let your junior accountants practice their math by re-counting your change after you leave the register, for accuracy. Create a cool personal budget sheet for your teens to use to keep track of their spending and savings. This will help them later in college. As a Mom, know that each interactive learning activity you create and encourage builds your children’s financial foundation so they can survive successfully in life.

Copyright 2006 Pat Brill

Pat Brill is co-founder of http://www.SilkBow.com which supports Busy Moms with free gift ideas and helpful tips to meet the challenges of motherhood. SilkBow is the perfect place for the perfect gift. You can contact her at pat@SilkBow.com.

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