Good Economic Sense

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January 21, 2011

April is for new beginnings – taxes, showers, Passover, and Easter. As we focus on last year’s finances and this year’s tax planning, parents (including noncustodial) should remember to teach children how to handle money. An allowance for children as young as four can be the foundation of good fiscal skills. Just remember these rules:

1) Be consistent. Pay at time intervals that make sense to the child. For a four year old this would be at the end of the day. For older children pay weekly or biweekly.

2) Set out appropriate tasks, but remember some chores are done as part of being in a family.

3) Pay only after the work is done and done correctly.

4) Never, never miss a pay day. You do not want to produce the next corporate misfit who stiffs employees.

5) As the child becomes school aged, add a philanthropy component. Ten percent must be used for charity.

6) By age twelve, the child must be taught to keep a ledger and record income and purchases. This will give the child a means to begin basic budgeting.

7) When talking about finances with your children maintain an age appropriate conversation and resist offering too much information. Good examples are:

a) Let your preschooler know you are paying bills and allow them to lick the stamps and envelopes.
b) Pay bills while the children are doing homework so they associate bill paying as a routine task.
c) Be careful not to say “we can’t afford (something)” when you mean “we don’t want to spend our money that way”. If it is an unaffordable option, don’t be ashamed to let them know while simultaneously reassuring them they will never lack for necessities.
d) Explain about saving for something big by forgoing smaller impulse items.

Most of all, make sure your children know that money does not make the person. Noncustodial parents can also promote this philosophy and adopt these techniques even as an every other weekend practice. Just be mindful not to use this exercise as an opportunity to criticize the child’s other parent.