Start a Good Habit While Your Children are Young:
Teach them about Money
By Diane Sague Ehnes
Children who learn about money and how to save at an early age are at a great advantage to develop the building blocks for sensible financial decision making throughout their lives.
There are countless ways in which we can teach our children about money. We’ll be looking at several of them in the next few issues – this month we only scratch the surface but will hopefully get you started on the right path, if you haven’t already begun.
Talk About Money
First of all, be mindful how you talk about money in front of your children. Be open with them about why you choose to spend money the way you do and frame it from the context of values and making good choices. Don’t just say something is too expensive. Discuss whether an item is a need or a want. Determining the difference is one of the hardest concepts for any of us to learn. If your child sees a really cool toy on a commercial, they probably “just gotta have it!” This raises a perfect opportunity to talk about needs and wants (and also about the concept of marketing).
Spending Power
The best way to learn is by doing. Start by giving your children an allowance and afford them some spending power for experimentation. How much, how often, and for what purpose are the questions you will need to answer for your specific child.
Here are some allowance guidelines that most experts agree upon:
• Be reliable and pay the allowance on time.
• Require kids to set aside a portion of their allowance in a safe place to get into the savings habit.
• Consider paying interest on savings for older kids; it teaches the value of compound interest.
• Require kids to spend money on their needs as well as their wants. Perhaps they pitch in on the new shoes that cost more than you want to spend.
• Allow your kids to learn to make their own choices, and mistakes, with money – as long as their choices don’t violate your guidelines, family values, or safety rules.
As with all research, the Internet can be quite overwhelming, but one great online resource is FINRA (Financial Industry Regulatory Authority), www.fnrafoundation.org. The Investor Education Foundation’s mission is to provide investors with high-quality, easily accessible information and tools to better understand the markets and the basic principles of saving and investing.
Diane Sague Ehnes is a Financial Advisor with Waddell & Reed. She lives in Southeast Portland with her husband and two young sons. Diane can be reached at dsehnes@wradvisors.com or
503-238-6036 x203. Waddell & Reed, Member SIPC.
* Resource: Talking Money with your Kids, Gerri Detweiler, free publication provided by Consolidated Credit Counseling Services, Inc., Fort Lauderdale, FL.
The opinions expressed are those of Diane Sague Ehnes and are meant to be general in nature and should not be construed as investment or financial advice related to your personal situation. Please consult your financial advisor prior to making financial decisions.
