For the young set to learn about saving, debt and money management, it all starts at home

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The Washington Post
By: Sonya Ryst
September 5, 2010

Some families watch TV after dinner. Others review white papers on economics.

Taking the idea of talking to the children about finances to unusual lengths, John and Heather Scanlon have rolled out papers such as "A Primer on the $1.4 Trillion Federal Budget Deficit" and "High Unemployment: The Recession's Harshest Reality."

Sure, their three older kids would have preferred to watch TV, he said, but they asked questions and paid attention during the lessons.

"The kids love talking about money," said John Scanlon, chief operating officer of Intersections, a company in Chantilly that provides identity- protection services, including credit monitoring and spyware zapping. "Why not have conversations that are constructive?"

Teaching youngsters how to manage money can be a feat, particularly now, as people grapple with their shattered finances in the tough economy. Only 55 percent of Americans have a savings plan with specific goals this year, compared with 62 percent in 2008, according to the America Saves campaign and the American Savings Education Council, which surveyed 1,000 people in February.

That's bad news for the future of our debt-mired country.

"You have to develop a measure of skill yourself in order to be able to model the behavior for your kids," said George Barany, director of financial education at the advocacy organization the Consumer Federation of America. "Young people who save successfully learn to do so at home."

So maybe the Scanlons are on to something. The older Scanlon children already have savings accounts, and they are expected to give to charity. The toddler and baby on the way will follow suit.

Not that it's always easy. "The kids certainly sometimes feel perhaps a little put out that we so believe in saving," Heather Scanlon said. When the children don't spend their weekly allowances, they get more as a reward. So whenever they want to buy something, Scanlon tells them to "remember you'll lose your match."

Asked what they thought about their lessons, Trevor, 13, and Hanna, 11, sat together and wrote a sort of white paper of their own. "Our parents had to explain some information to us, especially to our 8-year-old brother," they said. "It was boring sometimes, but in the end, we did learn a lot about our government's taxes and spending."

"We also know our parents' lesson about saving our money," they said. "But they double our weekly allowance if we don't spend anything, so we already did 'get it' and save a lot!"

The Scanlons think it's important to teach their family about money because of their backgrounds. John grew up in a rowhouse in Jersey City that didn't always have hot water. Heather worked two jobs in high school and college. Both started out burdened with debt from business school, and they didn't like the experience of poverty. "We have the same attitude," Heather said, "because we've had similar struggles."

John volunteered to teach financial literacy classes through Junior Achievement at their elementary school in Fairfax. The worldwide nonprofit organization offers programs to educate students about entrepreneurship, work readiness and financial literacy. It also puts out the reports the Scanlons offer as after-dinner fare at home.

So how do parents who have struggled financially help their children turn into adults who are good with money?

"As hard as it is, you might have to be honest with the kids about your own financial struggles," said Laurie J. Blackburn, a certified financial planner and vice president in Wealth Management at McLaughlin Ryder Investments in Alexandria. She said children will sense it if the family is under financial stress. When you explain why you have to cut back on spending, she said, they will get the chance to learn from your experiences.

When Howard Merson heard on the radio about Bernard Madoff's arrest in 2008, he immediately called his wife, Caren, to tell her that they had been victims of his Ponzi scheme. Merson declined to say how much they lost, but he said it was "a substantial amount" -- enough to affect their standard of living.

Within days, the Mersons sat down with their children -- now 18, 17 and 12 -- to explain that they would need to be more frugal. Merson and his wife would go back to work, and the children would need to apply for financial aid to attend college. The oldest two worked full time the following summers and part time during the school year. The family moved from Connecticut to Vermont, where they could have a slower and simpler lifestyle.

"It's taught the kids more than anything else that as far as financial matters go, you can't count on anything as absolute," Merson said. "Our kids are probably in a better position maturity-wise of approaching their adulthood than my wife and I were."

Parents who feel out of their depth teaching financial lessons will find an abundance of resources. The Securities and Exchange Commission explains the basics on its site. The Washington nonprofit Jump$tart Coalition for Personal Financial Literacy, which was created by William E. Odom, the former chairman of Ford Motor Credit Co., has a list of personal finance standards for students in grades K-12, because it's never too early to begin learning about financial planning, debt management and investing. Jump$tart also provides an online database of books for young people.

Consider where the information is coming from, because lenders sponsor many financial literacy resources. Banks have promoted credit cards as a way for parents to help teenagers learn to manage money. And they have come under fire in recent years for visiting college campuses with gimmicks designed to get teenagers to take on credit card debt.

For other parents, stretching limited resources is a daily struggle.

J'Mia Edwards, a single mother of three in the District, decided to take financial literacy classes to figure out where she was going wrong with her budget and how to save on less than $30,000 a year. It's challenging when the kids want cable and need school clothes; she likes a good cup of coffee and sometimes treating the family to a meal out.

Edwards was so determined that she signed up for a class from Capital Area Asset Builders, which sponsors workshops and seminars that provide financial information, tools and access to products that can be used to increase savings. The Washington nonprofit is teaching her about things such as how to budget, manage credit and choose the right bank.

She's learning that you can't have it all, so something has to give.

By writing down her expenses outside of her monthly bills, she discovered that she was spending more than she could afford on coffee from Starbucks, gas and eating out. Now she cuts back on those costs.

To protect herself and her children, Edwards, 29, is trying to figure out how to build an emergency savings fund. Her children are 10, 8 and 2, and she thinks it's important that they learn strong habits.

The lessons are coming, but it isn't easy.

She has tried to wean herself from air conditioning during the brutally hot summer. Sometimes she slips.

She paid $50 for a new car seat; the old seat was still usable but missing a metal piece. She realized later that if she had gone to the Children's Hospital, she could have gotten one for $20.

As she put it: "I say there's no money tree in the back yard that I can just go and grab dollars off."

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