Money management tips: My Piggy Bank is Empty!

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Money management tips: My Piggy Bank is Empty!
Teenagers today spend more than $153 billion a year. A typical high school graduate stands to earn over $1 million in adulthood - without adjusting for inflation. With so much earning and spending occurring at an early age, teaching basic money management skills to children is critical.

America's young adults lack the basic personal finance knowledge needed to make the most of their money - both now and in the future. Research shows that fewer than half know the basics about credit, checking, savings accounts, or auto insurance.

Parents can teach their children to become regular savers and responsible borrowers now, so they'll be prepared when they're out on their own. Here are some suggestions to get started:

Younger than age 5

Use coin banks to help children learn how to identify coins and count money.

Introduce the concept of money by giving children small change to spend occasionally when you go to the store. Limit options in order to save and reduce conflict.

Ages 5 through 10

Give a weekly allowance to offer hands-on money management experience. Because children know they'll regularly get a set amount of money, this makes it easier to learn how to save.

Let children save for, and buy something they really want. Rewards reinforce young children's savings habits, so tie saving in with spending. Use three containers labeled "Spend," "Save," and "Share". Suggest that children contribute a portion of their allowance and cash gifts to each to teach how to spend wisely, save regularly, and give to others.

When the "Save" container builds up, take children to the credit union to open a savings account.

Provide opportunities to earn extra money by doing jobs not included in their regular responsibilities.

Ages 11 through 14

Include children on shopping trips to teach them what things cost and how to use smart shopping techniques. Let them help compare product qualities, prices, return policies, and warranties.

Encourage them to do odd jobs, such as babysitting, yard work, or pet care.

Encourage children to use their own money to buy beyond the basics, like clothing and accessories.

Ages 15 through 18 and Older

Discuss saving plans for long-term goals, such as education and cars.

Consider giving teens a seasonal clothing allowance, beyond their regular allowance. After setting guidelines and limits, let them make their own clothing choices.

Consider helping financially responsible teens open a checking account.

Consider encouraging financially responsible older teens to use a debit card with their checking account.

Money as Reward/Penalty

Don't link allowances to routine chores. Children help around the house because they're members of the family. They get an allowance to learn how to handle money. Linking the two may result in children who decide the money isn't worth the work.

Don't link allowances to behavior. This practice confuses the issue, and can become a source of conflict and manipulation.

Don't use money as a bribe for good behavior; or you may end up with children who only behave for pay. It's OK to reward children for courageous or especially good behavior, if money is given after the fact.

Avoid paying for good grades. Children should do well for themselves and learn to set and achieve their own standards. It's also unfair to children who work hard, but are unable to attain high marks.

Money and Family

Include children in family money discussions. Without revealing all the details, give children a sense of your financial position and a statement of your family values, so they can understand boundaries, guidelines, and priorities.

Invite children to help when paying monthly bills. Discuss your family's money-management philosophy.

Have a family meeting to choose a family treat or trip to save for. Discuss ways each family member can help reach the goal.

Consider paying children for extra jobs around the house that you would hire someone else to do. Make it clear that it is a job, not a family responsibility. Explain the job, offer fair pay, and allow the child to say "no".

Encourage Saving

Teach children to pay themselves first. Help them establish an amount to save regularly.

Consider matching amounts that children deposit in their savings accounts.

Teach older children concepts such as compound interest, safety, and liquidity.

Help young children set goals they can reach in a few weeks. Hang a picture of the item they are saving for on the refrigerator or bulletin board; set up a calendar and container for money.

Help older children and teens set goals using a savings account and longer time frames. Make sure savings goals allow them enough spending money to enjoy themselves, while sticking to their savings plan.

Discuss ways to earn and save money.

Allow children to withdraw money from their savings accounts for appropriate reasons to demonstrate the purpose of saving.

Encourage teens to build an emergency fund for unexpected emergencies - like car repair.

Because learning about money is as important as earning it, the National Endowment for Financial Education, in partnership with CTCE Federal Credit Union and Americas Credit Unions, is providing hands-on course materials to schools that acquaint students with the basic financial planning and credit concepts. For more information about this program, please contact CTCE Federal Credit Union Marketing Department at 610-376-6639, ext 121.

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