I'm often asked to name the most common mistakes parents make when it comes to teaching kids about money. I can think of plenty, but ticking off a laundry list of boo-boos strikes me as too negative. In the interest of accentuating the positive, I'd rather turn things around and give parents a list of ten financial rules to live by:
1. Talk to your children about money. The biggest mistake parents make is ignoring the subject. You don't have to sit your kids on your knee for a lesson in personal finance, just answer their questions in an age-appropriate way. And take advantage of everyday situations -- a trip to the grocery store or the bank, for instance -- to teach them how to compare prices or where the money comes from when you punch the buttons at an ATM.
2. Take it slow. Don't rush children into things they're not ready for. If your youngsters always leave cash and coins scattered around the house, they're probably not ready to handle an allowance. If your college-age kids consistently overdraw their checking accounts, they're not ready for a credit card.
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3. Small lessons have a big impact. Don't assume your kids know even the most basic things about money. When my children were younger, we had a rule that gift checks went into the bank but the kids could keep any cash. When my son was 14 and received two $50 bills for his junior-high graduation, he didn't want to spend them. So we told him to put them in the bank. He was dumbfounded. "You can put cash in a bank?" he asked.
4. Keep your system simple. If you can't manage it, your kids won't be able to, either.
5. Focus on your top priority, whether it's budgeting, investing or charitable giving. Concentrating on one area helps to streamline your system (see the previous two rules) and keeps your from feeling overwhelmed.
6. Remember that parents have power. You may worry that kids are influenced by the media or by their friends. But regardless of their age, you're still their primary influence when it comes to money matters. They'll listen to what you have to say.
7. Trust your common sense and be consistent. If you promise to give your kids an allowance every Sunday night, follow through. If you've told them no advances on their allowance, don't waffle.
8. Don't buy your kids everything they ask for. It's tough to say no if you can afford to say yes. And kids are masters at pushing buttons to make you feel guilty. But they need to hear that two-letter n word. And give them a reason for denying their request.("You already have a PlayStation 3. If you want a Wii, you'll have to save your money and buy it yourself.")
9. Keep your sense of humor. You can't beat a smile for easing any tension.
10. Know your children, so that you can adapt the other rules to their abilities and interests.
MORE ADVICE: Check out Janet Bodnar's book, Raising Money Smart Kids.
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