| Family Management | Elementary | Ages 3–5 | Ages 6–10

Boosting your child's 'MQ': Talking to kids about money

Teaching kids about moneyBy now, most of us realize we need to pay attention to our kids’ emotional and cognitive growth. We understand so much more than we used to about empathy, compassion and emotional intelligence, or “EQ.”

But what do we know about our kids’ MQ? That would be their money quotient. Do our children know how to spend and how to save? How to tell “want” from “need”? Do they get that things aren’t what make us happy? That we work hard for the money?

My own parenting skills seemed to fall into a slow skid when it came to monetary matters. The whole allowance-for-chores arrangement was a challenge for me: Should they clean their rooms? Wash the dishes? Spend their money on toys or clothes or schoolbooks? Clearly, I never understood the rules.

As they got older, I hired them for odd jobs. But I felt guilty taking time away from their homework, their sports and other extracurriculars, such as, it turned out, surfing the Web and watching Ally McBeal.

What I needed were some good tips some positive, useful ways to teach my children a little something about the way things work when it comes to the almighty dollar.

That’s why I have created the following list. I’m not saying I have all the answers, but hey, it’s a beginning.

10 things you and your children should know about money

1. Understand your money origins
How did your own parents treat money? Maybe they pinched pennies, and now so do you . . . or maybe you didn’t like their spending style and resolved to lavish things (everything!) upon your children. The point: Realize that your values and attitudes have been — at least in part — shaped by your own family experiences. Make sure you don’t repeat or overreact to your parents’ missteps.

2. We want our kids to be discriminating spenders
That means they must know how to make choices: Should they buy the blue truck or the new game? The football or the basketball? The new doll or the new dress? Help your kids — from an early age — acquire the gift of decisive thinking. Give them reasonable options and let them do the choosing.

3. Money doesn’t grow in ATMs
Or credit cards or even wallets. When I was small, I’d watch my mother write a check, buy some groceries and think, “I can’t wait till I grow up and earn some checks of my own!” Talk to your children about what it takes to acquire the green stuff. And while you’re at it, explain that most things cost something — even parking, even electricity, even water. But while you’re at it, you might add — just for good measure — that the best things in life are free.

4. Give your kids allowances
It is the way they’ll learn how to manage money. Scale the dollar amount to their age. Some parents like to give kids a buck per year (a 5-year-old gets $5 a week, for example). But specify just what you expect them to pay for; otherwise, you’ll be arguing over every movie, every electronic gadget and every article of clothing.

5. Don’t tie allowances to chores
Your children should be taking on some responsibilities — taking out the garbage, helping with the dishes, making their bed — just because they are family members. At the same time, they should have some money to spend so they can learn how to spend it.

6. Teach them to save
Start with the obligatory piggy bank and suggest they put away a certain amount — say one-third of their allowance — each week (or each month, if you’ve settled on monthly allowances). When they are older (in third or fourth grade) help them open a savings account at a bank. Let your child make deposits and explain how interest works.

7. Money isn’t only about spending and saving
It’s also about giving, sharing and understanding the needs of others. Philanthropy begins now. Help your children choose a cause, charity or organization they’re interested in. Hopefully it’s something they can relate to that has special meaning. Make this a family project, with field trips and up-close and personal interaction with the recipients of your kids’ contributions.

8. Encourage them to earn their own money
Even small children can do extras around the house, such as filing photographs in albums or baby-sitting younger siblings. When they get older, they can apply for jobs as lifeguards, nannies or baristas — all great opportunities for developing their work ethic and money smarts.

9. Don’t overindulge
If you spring for the latest, greatest Xbox game or American Girl doll just because they ask, they’re sure to expect everything and appreciate very little. Showering your kids with things is also a sure way to deaden incentive and ignite entitlement. Why toil and save when Mom or Dad comes up with all the goods all the time?

10. Set an example of money management
That means talking about your work, how you invest and save money, and why you are putting funds away for college. Small kids will understand simple concepts such as “wasting electricity” when the lights stay on too long, and that everything in a store costs something. Make sure they see you budgeting and saving for those extras. As they get older, talk about the downsides of living on credit. And remind them that, while money counts, so do family, friends, learning, music, birthdays, bedtime stories and oh, so much more. That may be the most important lesson of all.

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