Financial Foundation

Teaching children about money

Article Courtesy of Nancy Harris, CMFC, CDFA

President, LPL Financial Planner, New Foundation Wealth Group

Here are some simple lessons to help children build a solid foundation for making a lifetime of financial decisions.

Lesson 1: Learning to handle an allowance

An allowance is often a child's first brush with financial independence. Some parents ask their child to earn an allowance by doing chores around the house, while others give their child an allowance with no strings attached. If you're not sure which approach is better, you might want to pay a small allowance and give them the chance to earn extra money by doing other chores. If you decide to give your child an allowance, here are some things to keep in mind:

• Stick to a regular schedule (the same amount of money on the same day each

week).

• Consider giving an allowance "raise" to reward your child for handling their

allowance well.

Lesson 2: Opening a bank account

Many banks and credit unions have programs that provide activities and incentives designed to help children learn financial basics. Here are some other ways you can help develop good savings habits:

• Teach about compound interest by showing how much "free money" has been

earned on deposits.

• Offer to match bank deposits.

• Take a few dollars out of the account occasionally. Young children who see money

going into the account but never coming out may quickly lose interest in saving.

Lesson 3: Becoming a smart consumer

Commercials. Peer pressure. The internet. Children are constantly tempted to spend money but aren't born with the ability to spend it wisely. Children need guidance to make good buying decisions. Here are a few things to help a child become a smart consumer:

• Set aside one day a month to take your child (or grandchild) shopping. This will

encourage them to save up for something they really want rather than buying

something on impulse.

• Just say no. You can teach a child to think carefully about purchases by explaining

that you will not buy them something every time you go shopping. Instead, suggest

that they try items out in the store, then put them on a birthday or holiday wish list.

• Show them how to compare items based on price and quality. For instance, when

you go grocery shopping, teach them to find the prices on the items or on the

shelves, and explain why you're choosing to buy one brand rather than another.

Make these lessons positive and fun! We are all on this journey to improve our financial knowledge and independence.

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