Your attitude toward money -- the way you handle it and discuss it -- makes an impression on your children just as surely as your attitude toward other personal matters.
If you speak longingly of the neighbor's new car or television set, if you spend impulsively, if you often quarrel about money with your spouse, the children will notice. Your behavior reveals the place money has in your life. It's unrealistic to expect your children to develop an attitude toward money that's more mature than your own.
So what can you do to encourage financial responsibility in children of various ages, and how much can you expect of a child?
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What preschoolers can learn about money
Three- and 4-year-olds aren't too young to start learning about money. At least they can be shown that money is something you exchange for something else. You might want to give your child a few coins to spend on a piece of penny candy or fruit at the store. This will demonstrate the use of money, even though the relative merits of different purchases are still beyond the child's comprehension.
Giving an allowance probably doesn't make sense at this age because children's concept of time isn't developed enough to grasp the idea of receiving a regular income. Besides, you know what they'd spend it on.
Nevertheless, there are a few specific money-related exercises that can benefit a preschooler. As your child learns to count, you can demonstrate the relationship between pennies and nickels, then dimes and quarters. Also, children like to play store with play money. It's a good way for them to learn the role of money.
Situations that don't seem to be connected with money at all may be the most important influences. If preschoolers are encouraged to share things, to take care of their toys and pick up after themselves, their sense of responsibility will be reflected in the attitudes they develop about money. Psychologists generally agree that a person's attitude toward money is really an extension of attitudes toward other things.
Thus, if children feel secure at home and are given freedom to explore their environment within reasonable limits, then they are off on the right foot where money is concerned, too.
Good money habits for kids
Allowance. Most kids are ready for a regular allowance when they start school. A weekly schedule is probably best. The amount depends on what you expect the child to buy. If he or she has to pay for lunch and bus fare, then the allowance must be bigger than if you paid those expenses yourself.
Either way, kids need free money, to spend or save as they see fit. Handing out exact change for lunch doesn't teach children much if they merely convey the money from your hands to the hands of a cafeteria cashier. Deciding what to do with an extra dollar each week is a more valuable experience than just carting lunch money to school.
With a little extra money at their disposal, kids in the elementary grades become serious shoppers. Help them learn to compare quality and prices of similar items. Allow them to make small choices on their own, such as gifts for friends or toys for themselves. As they mature, give them more say in buying clothes for school and play, pointing out why one purchase may be a better buy than another because of quality, appropriateness or price. This will equip them for making intelligent choices.
Allowing kids to do their own shopping means you have to expect some mistakes -- a cheap toy that breaks the first day, or too much candy, or clothes that don't fit. Let your child make mistakes like that. Then do your best to make it a learning experience, not simply an occasion to say, "I told you so."
Family financial discussions. Including older elementary-school kids in a few family financial discussions is a good way to demonstrate the kinds of choices adults face. For example, the cost of a family vacation depends largely on where you go. Would the kids rather spend one week at the beach or two weeks in the mountains? Teenagers should participate regularly in family financial discussions. They still needn't know every detail, such as total family income or the size of the mortgage, but they should know what pressures are on the budget.
A few cautions about including kids in family financial affairs: First, don't expect them to shoulder the weight of a financial crisis. Second, don't make them feel guilty about costing you money. If financial setbacks make cutting some expenditures necessary, deciding where to trim the family budget can be an educational exercise.
Saving. Children also should learn to save money on their own -- starting in elementary school. The simplest way is for you to open savings accounts in their names. For an account in the name of a very young child, you can make deposits and withdrawals on the child's behalf. Children who have reached the age of "competence" -- a subjective standard that depends on state law -- can open and manage their own accounts.
Some banks charge stiff service fees for small accounts but may make an exception for minors' accounts. If not, the service fees can be high enough not only to wipe out the interest earned each month but also to eat into the principal. That's a valuable lesson to learn, but not one that most young children are ready for.
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