Thursday, September 09, 2004

When Do You Teach Your Childen About Money?

I remember the look on my father's face the first time I pulled out a credit card.

I guess it was a rite of passage for him. He asked me if he had "signed for it." I was probably about twenty or so, and he shouldn't have been that surprised. In many ways, he had prepared me for the world of credit, taxes, financing agreements, loans, and so on.

But I could tell that it surprised him.

My brother and sister and I had savings accounts as long as I can remember. I think my parents put some seed money in our accounts to make us feel good about collecting, but we were expected to deposit some of our allowance into our bank accounts on a regular basis. It was a way of investing in ourselves and giving us something to plan ahead for.

There's a memory of my father sitting down with me, and having me carefully read the instructions for my first income tax payment. He showed me where to enter what, and how to look up how much I owed, or how much I would get back. After that first time, I was on my own. I've done my taxes for myself ever since.

I believe that in there somewhere we even worked out a budget. I don't recall how old I was, but it made a lot of sense when we did it, and the exercise has helped me ever since.

But I don't remember really talking about finances in school, except maybe when it came to counting out lunch money.

A Wharton article, Teaching Kids about Money: Why It's Not Just Fun and Games takes a look at making financial literacy something taught in classes. It opens with this quote:

"Improving basic financial education at the elementary and secondary school level is essential to providing a foundation for financial literacy that can prevent younger people from making poor financial decisions that can take years to overcome." Alan Greenspan, chairman of the Federal Reserve Board, 2001

But that type of practical application seems to be something schools often leave to parents. A couple of pages I found on teaching children about money are these two:

Teaching children about money

A snippet:

Tips for teaching children about money. Younger children may believe that parents have an unlimited supply of money, unaware that checks and credit cards are not the same as cash and that bills must be paid.

Another one that does a nice job of explaining the advantages and disadvantages of the dole system and the allowance system: Teaching Your Children About Money

A good time to consider giving your child money is when he or she is between the ages of five and eight. Most parents use the Dole System or the Allowance System, and both have advantages and disadvantages. Research shows that in some instances an allowance may cost less than simply giving or doling money out for specific needs and wants.


Anonymous said...

Hi Bill! Thanks for the links! With 3 teenagers in the house, we are working hard to deal with these issues on a daily basis. Last year when I explained to the kids that it costs money for them to call their friends in different countries - I recieved dumbfounded looks of disbelief. So I had my work cut out. Last night we worked through the economics of having a separate phone line for the kids, or separate cell phone accounts, or pre-paid cell phones. My experience with the issue of allowance v.s. money for work performed is consistent with one of the articles.... money for work performed is better to help them understand the value of the money.

William Slawski said...

You're welcome.

I imagine that you have your hands full. :) I agree that money for worked performed is the best probably the best approach.