By Michael Rupured
University of Georgia
Financial management is seldom taught in schools, so the job lies in the hands of parents. And when it comes to money, children often learn more from what parents do than what they say.
The first step is to be a good example. Save regularly, shop wisely and plan spending to meet family goals. When children shop with you, encourage them to help you compare similar products. Talk about which one is the best buy for your family and why.
When to startBy age 3, children are old enough to notice that the shiny coins that so fascinate them can be swapped for things they want and need.
As young as age 6, children can be taught to save. Before they leave the nest, teach them how to save, spend and borrow wisely. Teach them how to budget, use bank accounts, buy insurance and invest for retirement.
No matter what age, help your child develop a savings habit. Most adults are either spenders or savers, and savers are far less likely to have money problems than spenders. Matching your child's saving with your own contribution is a good way to encourage the savings habit.
Incentive to saveFor example, if your daughter wants a new doll, post a picture of the doll in her room along with the price. Attach an envelope for the money she saves. For every dollar she saves, you add 50 cents or some other amount you can comfortably afford. When there's enough money in the envelope, then allow her to buy the doll.
This example is based on the assumption that your child gets an allowance. An allowance lets children share in the family's financial resources and teaches money management skills.
Teach your child to save at least 10 percent of her allowance. The earlier saving becomes a habit, the easier it is to stick to it as an adult.
A keyHelp your child develop a simple plan for spending. Start with a goal, something your child wants to do or buy. Determine the dollar amount of the goal and the time required to reach it.
It's best to start beginners and young children with a goal they can easily reach in a few weeks or a month. Be sure to include in the spending plan other expenses the allowance should cover.
Next, open a savings account in your child's name. Talk with your child about how interest accumulates and what happens if money is withdrawn.
Not just the kidsMake saving a family project. Set a goal for something the whole family will enjoy, like a family trip.
To reach your goal faster, choose one thing you spend money on every week that you could do without. Tell the family what you'll give up and how much you'll save every week.
Ask each family member to set their own savings goal for the trip. Help them to look for a weekly expense they can eliminate to help meet the family goal.
Starting early to teach your children to become good money managers can prevent you from having to bail them out of a financial mess later in life.
(Michael Rupured is an Extension Service financial management specialist with the University of Georgia College of Family and Consumer Sciences.)