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Raising dollar-smart kids

By: Chauelle Johnson

Date Posted: 1999-01-08

Mom, dad can I have that?" How many times do you hear this as you walk around the store with your children? Do you ever stop and wonder where children get their money sense or where you obtained yours? Perhaps you were lucky enough to have financially savvy parents and teachers who taught you all you needed to know about saving and investing for the future. If you were not, you may find yourself living from paycheck to paycheck and wondering where you went wrong. If most of us are honest, our financial education in childhood and early adulthood left a lot to be desired. But we donít have to let our children to follow that same path. As soon as they are old enough to count, they can be taught some simple concepts of spending, saving and sharing. The values you implant in your child today will last a lifetime.

Here are some simple steps you can take to prepare your child for managing money in adulthood. Let your children be involved in small spending decisions that affect them and the household. Discuss the pros and cons before spending the money. When shopping discuss how to compare items and get the best value for money. If you decide your child an allowance, teach your child the value of saving instead of spending. To assist with this, give the allowance in denominations that will help them to save. For example, instead of one $5 bill, give them five $1 bills and encourage them to set aside at least $1 for savings. As your child saves, you may want to teach them the concept of simple interest by paying interest on their personal savings account. To further encourage savings, you could match the amount that your child saves.

At an early age, we can teach children about the high cost of credit. Occasionally, children may ask to borrow money from you. If you lend the funds, you may want to charge a small amount of interest to help your child to understand that in the real world borrowing can be quite expensive.

Donít forget to also teach the concept of sharing. Money can be used to help make other peopleís lives better. Giving small amounts of money as charitable contributions and saving up for gifts to give to the people you love is often far more rewarding than spending everything on oneself.

With older children you can help them understand the value of investing and the power of compounded interest. Hereís a quick example. Your child has a part-time job and invests $38.50 a week from age 14 to 18. This is invested in a tax-deferred account that averages a 10% rate of return. Your child doesnít invest another cent after age 18. When your child reaches age 65 the account will have grown to a little over one million dollars. Age 65 certainly seems like a long way off for young people but the point is to help your child understand the power of investing and the importance of learning how to manage money to achieve financial goals. Whether itís a new bicycle or a computer it wonít happen without first establishing wise spending and saving habits.

To learn some fun ways to teach your child about money the Kadena Family Support Center is offering a class, Raising $ Smart Kids. The class will be held on Thursday, Jan. 21, from 12:30 to 1:30 p.m. The workshop is aimed at parents of children ages 8 to 13, however, all parents can benefit from the topics covered. For more information, call 634-3366.

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