Teaching youth about money management is more than dollars and cents

As we start back to school, everyone is buzzing about academics.  Although very important, teaching youth about money management is giving them a life skill used everyday as an adult.  But, teaching about money is more than knowing what a dollar or quarter are, or putting money in a piggy bank.  Spending, borrowing, giving and saving are all part of a well-rounded money management knowledge base.

Teaching about Spending

Let children make mistakes and learn from the consequences. Make sure children know you've made some mistakes, too.  Explain what quality, availability, and other comparison factors mean. Don't assume they know what these terms mean.

Let your child know you know you can't afford to buy everything you want, either. This could be brought out while window-shopping together.  Explain the bigger financial picture. For example, a movie involves not just the price of admission, but gas for the car, popcorn, pop, time and energy. This will help them be more aware when making financial decisions.

Communicate about money. Include children in family financial decisions and discussions appropriate for their age. This helps them feel valued and tells them that money is not a taboo subject.

Spending Teaches:

* Difference and balance between wants and needs

* Opportunities for comparing alternatives

* Making decisions and taking responsibility for themselves

* Keeping records

Teaching about Borrowing

Never loan children more than they can repay and then end up forgiving the loan. Keep the amount realistic for their financial means.  Draw up a contract for any loan with your child, no matter what age. Charge interest or set up a grace period within which no interest will be charged. Use a loan payment book and explain how it works.  Discuss how to save money to buy something instead of borrowing money to buy it. For example, using money saved with coupons; bringing your lunch to work instead of buying it; or collecting change every day.

Borrowing Teaches:

* Cost of borrowing

* Borrowed money needs to be paid back

* When it is appropriate to borrow

* Consequences of buying now and paying later

* Structure of borrowing

* The idea of credit limits

Teaching about Sharing

Explain that sharing with others includes not only money but resources such as time, materials, or skills.  Use special occasions to remind children about sharing with others who are less fortunate.  Initiate a community service project for which older children can take leadership.

Point out opportunities for children to donate time, energy, and skills to religious and community projects.  Let older children choose the project.

Sharing Teaches:

* Good feelings for giver and receiver

* Helps other people

* Doesn't always require public recognition

* Obligations to give money to certain organizations,

i.e. taxes to the government

* Giving of yourself rather than giving money or gifts

Teaching about Saving

Explain the difference between planned saving (short- term) for a specific want or need and regular saving (long-term) for unknown items or emergencies. Help children set up short-term saving goals and let them know how long it will take to save a particular amount.

Provide non-monetary rewards to encourage younger children to save. It is hard for a ten-year-old to appreciate the little interest his $100.00 earned this month in the college fund when s/he couldn't get a special toy. Older children can learn to appreciate the reward of delayed gratification. Praise and encouragement help children learn to save for the long-term.  Motivate saving by annually matching the amount the child saves.

Saving Teaches:

* One method to get what you want or need

* The "pay yourself first" idea

* Planning and delayed gratification

* Interrelationship of spending and earning

* Different purposes of planned and regular saving

Source:  University of Minnesota - Children and Money:  Teaching Children Money Habits for Life, Fact Sheet