Tips for Teaching Your Kids about Money

(ARA) - Adults handle money everyday. From paying bills to shopping for groceries to making decisions about large purchases, managing money is something most of us do without giving it much thought. But for many parents, this important life skill isn’t something they necessarily discuss with their kids.

“Parents have the power to foster positive money management discussions with their kids, and these discussions will have a lifelong impact on a child’s ability to make good decisions about money,” according to Meridee Maynard, vice president for Northwestern Mutual.

According to a recent survey commissioned by Northwestern Mutual, more than 70 percent of parents believe children should start learning basic money skills no later than first grade. However, almost half of the same parents say they make poor financial role models, and are not capable of teaching their kids about money.

“Parents shouldn’t be afraid to discuss this topic with their kids,” said Maynard. “Even the most mundane activities can be used as a springboard for brief but helpful and fun money lessons.” She offers the following suggestions to help parents initiate discussions about money management:

* Do your kids know how much you spend on groceries? Ask them to come along, not to add to your list, but to help you shop, so they can get an idea of prices. The grocery store is a perfect place to talk about impulse buying and how to resist it. A trip down the cereal or snack aisle can spark a lesson about brand name versus generic prices.

* Do your kids understand what it takes to run a household? Have you ever listed all the expenses you pay every month to keep a household going? Do your kids understand why they need to turn off lights, televisions and computers when they're no longer being used? Why they need to value things around the house? Do they know how much the family spends on gas for the car for trips for school, sports, work and entertainment?

* What better time to bring up the cost of living than when you are paying the bills. Put a few in a stack and do a little show-and-tell. Talk about what happens when you add them all up. Or use cash, stacks of singles, fives, tens, and twenties on the kitchen table. “Pay” each bill by removing money from stacks. It's a great exercise that makes a point visually and dramatically.

* Do you weigh purchase decisions out loud? Or do you see something in an ad, jump in the car, and bring it home? Talk about the pros and cons of a purchase with the family so that your kids see you weighing alternatives.

* Model restraint. Don’t shop for entertainment. Better yet, don’t go to the BIG SALE at the mall and take some time to explain to your child why you are not attending the sale. This can offer a quick lesson on the difference between need and want and the impact of an unplanned purchase on the family budget.

* Shop smart together. This is ideal as long as it doesn't end in an argument. Start when kids are younger and try to teach them about stretching their dollars, alternatives to designer brands, buying on sale but not on impulse, what buying on credit means, judging quality, recognizing gimmicks, and making good decisions. Share an analysis of why you're purchasing or not purchasing.

* Use real life examples. If you have refinanced your mortgage recently, you have a great opportunity to explain how small changes in interest rates can make a big difference over time. Don’t make it a math exercise; focus on what you have decided to do with the savings -- renovating a bathroom or increasing your savings.

* Not sure when to talk about money? How about while you are watching television? Here's your big chance to play devil's advocate to the ads that pelt your kids every 10 minutes or so. Also, programs often raise topics about saving or spending -- the presentations can portray a situation realistically or ridiculously. You can help kids make sense of what they see.

Northwestern Mutual, in conjunction with the National Council on Economic Education, has created a clearinghouse of free materials on personal finance education at www.themint.org. Parents and educators will find practical tips, lesson plans, newsletters and interactive challenges to help teach kids of all ages about money.

Courtesy of ARA Content