MONEY-SMART KIDS


Everyday Ways to Teach Kids

Janet Bodnar

You don't have to schedule a special time to explain money matters to your kids. Instead, take advantage of these situations that come up all the time.



I'm always interested in what other people have to say on the subject of kids and money. So I was intrigued when I saw a magazine article called "Everything You Know About Kids and Money Is Wrong." Have I missed something, I wondered?

Not to worry. Turns out there is a right way to teach children about money, according to the article. And the solutions it offers are things I've advocated consistently over the years.

For example, parents are advised not to rely on school but to start teaching their kids about money early. That's the basic philosophy of this column, as well as my book Raising Money Smart Kids. When children start to show an interest in, and ask questions about, money, you should answer them in a way that's honest and age-appropriate.

Dealing with money is such a natural part of life that you don't even have to set aside extra time to talk about it. Instead, you can take advantage of situations that crop up every day. When your child asks you to go to the ATM to get money for lunch at McDonald's, use the opportunity to tell her how the money got there in the first place -- that the bank is a like a big piggy bank for Mom and Dad (and sometimes it's empty).

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In the article, allowances come in for criticism if they're handouts. From my own experience, I'm a big proponent of allowances. Nothing is better for teaching kids how to set priorities and make spending decisions than having to get along on ten bucks a week.

But kids shouldn't get the money with no strings attached. In exchange, they should take over certain financial responsibilities from you. For a 7-year-old, that could mean paying for his or her own trading cards or other collectibles. For a 16-year-old, it could mean managing a clothing allowance.

The article also advises parents to get kids into the habit of saving. In my opinion, saving for a goal is a key money-management skill that every child needs to master before leaving home.

But nobody is thrifty just because it's virtuous. Like adults, kids need an incentive not to spend, whether it's saving up to buy an action figure or an iPod. Consider matching all or part of what they put aside.


Janet Bodnar is deputy editor of Kiplinger's Personal Finance magazine and the author of Raising Money Smart Kids (Kaplan, $17.95). Send your questions and comments to moneypower@kiplinger.com.




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