| Sargent & Lundy Savings Investment Plan |
| TEACHING YOUR CHILDREN ABOUT MONEY |
| The following excerpts are from a
newsletter published by the National Center for Financial
Education. The opinions of the author, Paul Richard, may
or may not reflect those of the SIP Committee. Money gives people - both young and older - decision-making opportunities. Everyday spending decisions, especially credit-based ones, can have a far greater negative impact on your children's financial future (and yours) than any investment decisions they (or you) may ever make. Educating, motivating and empowering your children to become regular savers and investors will enable them to keep more of the money they earn and do more with the money they keep. * As soon as children can count, introduce them to money. Take an active role because repetition and observing others are the two methods they learn by. * Communicate with children, as they grow, about your values concerning money and how to save it, make it grow, and most importantly how to spend it wisely. * Help children learn the difference between needs, wants and wishes. This will prepare them for making good spending decisions in the future. * Setting goals is a fundamental concept to help young people learn the value of money and also how to save. Nearly every toy or other item children ask their parents to get for them can become the object of a goal setting session. Benefits of saving to achieve the goal is an important aspect and provides built-in motivation. Goal setting for good grades, toys or savings, helps children learn to become responsible for their own futures. * When giving children an allowance, give the money in denominations that encourage saving. For example, if the amount is $5 give out five $1 bills and encourage at least one be set aside in savings. * Take the youngsters with you to a bank when you open their savings accounts. beginning the regular savings habit early is one of the keys to savings success. Don't refuse them when they want to withdraw from savings for a purchase or you'll risk discouraging savings all together. * Keeping good records of money saved, invested or spent is another primary skill young people must learn. To make it easy, use 12 #10 size envelopes, one for each month and a larger envelope for the year. Establish this system for each child. Encourage children to keep receipts from all purchases and then make notes. * Take children with you to stores, explaining how to plan purchases in advance and make unit price comparisons - also checking for value, quality, etc. Spending money can be fun and very productive when spending is planned. Unplanned spending however, usually results in 20-30 percent of our money being wasted because we obtain poor value with many purchases. * Allow young people to make spending decisions, both good and poor, and then encourage a discussion of pros and cons before more spending takes place. * Show children how to evaluate ads on TV, radio and in print. Will the product really perform and do what the commercials say? is it really a sale price? Just because something looks expensive, doesn't mean it represents the best value. Remind them that if something sounds too good to be true, it usually is. * Alert children to the dangers of borrowing and paying interest. Charge interest on small loans you make to them so they will learn quickly how expensive it is to rent someone else's money. * If parents are using credit cards, at a restaurant for example, take advantage of an opportunity and explain to children how to verify the charges, how to calculate the tip and how to take safeguards against credit card fraud. Explain also how and when you plan to pay for this and other charges children have observed. * Be cautious about making credit cards available to young people, even when they are entering college. Credit cards have a message: "SPEND!" Some students report using the cards for cash advances and also to meet everyday needs instead of an emergency (as originally planned). Many students in that group also reported having to cut back on classes to fit in a part-time job just to pay for their credit card purchases. * Establish a regular schedule for family discussions about finances. This is especially helpful to younger children. It can be the time when they count their savings and receive interest on their savings. Discussion topics should include the difference between cash, checks and credit cards and also wise spending, how to avoid the use of credit, plus the advantages of savings and investments growth. |
This page updated on 2/2/97