CU Community Home
SAS Credit Unions
Small Credit Union Resources
Scholarship Program
Mentor Program
League SAS Services
SAS Gazette Newsletter
SAS List Serve Sign up
Committees & Task Forces
Michigan Credit Unions
Maxwell, Herring, Desjardins Awards
Michigan Credit Union Foundation
MCUL AED Program
Michigan Credit Union League Home » CU Community » SAS Credit Unions » Marketing » Newsletter Help » Paternal Advice  

Additional Newsletter Topics
Ten Rules For Raising Money-Smart Children

Lori Bahnmueller
Michigan Credit Union League - Your Money Matters

For generations, parents have attempted in vain to convince children that money, in fact, does not grow on trees.

Rather than challenging junior to locate a forest of green currency, perhaps a more effective way to teach children the value of money is to do just that — invest some time teaching them money-management skills.

It is estimated that young people spent $99 billion last year — and yet 60 percent of pre-teens are unable to explain the difference between cash, checks and credit cards, reports the nonprofit National Center for Financial Education. Many youngsters are now making unwise spending decisions for the family or household. Others have easy access to credit, but lack the knowledge and experience to spend carefully, save regularly, and use credit wisely.

Parents and grandparents need to share these and other money issues with their children and grandchildren, beginning at an early age. There are ten simple rules parents can follow to help their children grow up to be financially responsible.

1. Find opportunities to describe how money works. One of the best ways to teach your children about money is to expose them to real life situations, such as using a credit card or withdrawing cash from an ATM. In the case of a credit card, you can explain that if you don’t pay the balance in full by the due date, interest will be added to the amount you owe. With older children, you might invite them to help you write checks to pay the monthly bills. Doing so gives them an eye-opening lesson on how quickly money can be spent.

2. Provide your child with a regular allowance. There’s probably no better way for your children to learn the basics of managing or mismanaging money than by providing them with an allowance. To determine an appropriate amount, consider your child’s age, your family’s financial situation, and local living costs. Whatever you decide, be sure to give the allowance on a regular basis.

3. Be a model money manager. Not surprisingly, children are more likely to be influenced by what you do than by what you say. The way you and your spouse handle money sends them an important message. For example, if you constantly use credit cards instead of paying cash, your children may well follow your example. Similarly, if you are a careful shopper or a diligent saver, hopefully your children will follow suit.

4. Share family finance with your child. Encourage open discussions about money and involve your children in family finances. This candid approach will go a long way toward increasing their understanding of the role of money. Experts say that children who are involved in family financial matters are better equipped to deal with a financial crisis, such as a parent’s job loss.

5. Teach the skill of budgeting. A great way to teach budgeting to younger children is to use the “three-jar method”. Have your child allocate a portion of his allowance to spending, a portion to savings, and a portion to giving to the less-fortunate.

6. Open a credit union or bank account savings account. Discuss the benefits of depositing money into a savings or share account and explain how the financial institution pays interest in return for the use of depositors’ money. Involve your child in the process by bringing him or her to the credit union or bank to open the account. You can encourage your child to make regular deposits by agreeing to match the amount of money deposited.

7. Teach basic investing concepts. Start by explaining how businesses operate and how shares of a company grow in value when people buy the company’s products. A great hands-on way to teach your children about investing, is to purchase them shares of stock in a company they are familiar with, such as retail store or food chain. Help your child look up stock prices on the financial pages, discuss how market factors like competition influence profitability, and explain the role of dividends and dividend reinvestment. Mutual funds provide another good investing lesson. Some companies even offer funds along with corresponding educational materials that are specifically geared to the young investor.

8. Encourage summer jobs and part-time work. Summer is an ideal time for children to develop good work habits. Suggest that your child look beyond the obvious and explore entrepreneurial opportunities such as yard maintenance, providing piano lessons, washing cars, babysitting or pet sitting.

9. Talk about paying for college. Once your children reach high school age, make it a point to get them involved in the college planning process so that they become aware of how much your family can afford and what part they will be expected to contribute. Then, work with your child to set financial goals and prepare a plan for meeting them.

10. Expect mistakes. If you want your children to learn how to handle money responsibly, you’ll have to allow them a fair amount of control over how they spend and save their money. Sure, they’ll make mistakes, but if the groundwork has been laid properly, the errors shouldn’t be major ones.

MCUL Home About Us Press Room For Consumers Home Contact Us Site Map