Start early when teaching your children about money

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Medical Economics
By: Steven Podnos
July 25, 2012

Start early when teaching your children about money

Many in the author's generation and previous ones grew up in homes that had enough money for basics but little else. Relatively simple items such as a new record album or nice item of clothing were considered treats. Parents cannot help noticing that children have different temperaments concerning money. Some are born savers; others are not. This hard-wired characteristic can be difficult to change and will have a great effect on a child's later financial behavior. In these years, it's worthwhile to introduce both a checking account and a debit card. The card can be attached to your child's checking account which you can help teach him/her to balance, or it can be a prepaid card that can be replenished online.

Among the most frequent- and vexing- questions I am asked by the medical families I counsel is the proper way to educate their children about money. This is an understandable concern, because most of the parents grew up in less affluent homes than the ones they now offer their children. The question has no easy answers, but I'll share some thoughts with you.

Many in my generation and previous ones grew up in homes that had enough money for basics but little else. Relatively simple items such as a new record album or nice item of clothing were considered treats. I find that people who grew up like this derive a deep sense of pleasure from having enough money to lead a more affluent lifestyle. I worry about much of the current young generation, which has grown up with significantly "more."

Parents cannot help noticing that children have different temperaments concerning money. Some are born savers; others are not This "hardwired" characteristic can be difficult to change and will have a great effect on a child's later financial behavior.

THE GRADE SCHOOL YEARS

When your child is in grade school, many studies suggest, helping him or her develop a work ethic and encouraging delayed gratification will help the child do better socially in later life. An allowance and some assigned chores may help in this regard. Teaching your child to save some of his or her earnings for future purchases and to give to charity may help build a sense of gratitude and develop the habit of delayed gratification.

During high school and even the later years of middle school, take two steps in your child's monetary education. First, if time allows, an outside job can be a wonderful experience. Your teen will learn how difficult it can be to earn and save money and perhaps will be motivated to go to college.

THE BENEFITS OF CAPITATING

Another idea I've seen for this age group is "capitating" a child's income and making him or her responsible for spending. You might determine a monthly sum that covers allowance, outside food and entertainment, and car expenses, if appropriate. After that it is up to your child to make the money last.

In these years, it's worthwhile to introduce both a checking account and a debit card. The card can be attached to your child's checking account, which you can help teach him or her to balance, or it can be a prepaid card that can be replenished online.

This is also a great time to introduce your child to the idea of saving for the future. Discuss compound interest, investment principles, and the fact that saving 15% to 20% of his or her earnings from an early age almost certainly will lead to financial security. Numerous books and Web sites are available to help in this mission.

During the child's 20s, reinforce and amplify all of the aforementioned information. In these years, seek to ensure the independence of your child, who is now a young adult If your child asks you for money, consider whether granting the wish will lead to independence or further dependency, and act accordingly. A young adult trying to J & . J & save some income certainly would welcome a match to his or her individual retirement plan from a parent who is happy to see that the child has learned something about money.

I have tried many of the ideas in this article with my three (now all young adult) children, with varying degrees of success. Each child's basic nature will influence how much he or she absorbs, but as all parents discover, sometimes you don't know what children have learned until later.

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This page contains a single entry by CFED published on July 27, 2012 6:40 PM.

Living paycheck to paycheck is reality for two in five households: Report was the previous entry in this blog.

Retirement-age women twice as likely as men to live in poverty--What's going on? is the next entry in this blog.

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