Children. Allowance and Financial Sense

[JoeMoney]

I have 4 kids, the oldest is 23. i was thinking last night about their growing up and their knowledge of money. I know more now then I did when they were small, but I did make a system of allowance, chores and gift funds so they understood money and how to handle the basic allocation and math.

I am developing a booklet for parents about teaching children the basics.

What is your opinion about what should be taught to kids? I mean we reach this point where we have all these questions about finance and credit and savings... what did we miss?

Thanks!
Joe

[MonkeyMama]

Everything should be taught to kids.

I had a savings account when I Was like 5, my own checking account at 13, and a credit card at 16 when I got my first "real" job. I know a lot of parents are scared to help their child get a credit card because they think they will fall flat on their face. I just think that is ridiculous. Pretend like credit cards don't exist so they can fall flat on their face in college or when they get their first job? Make those mistakes when you are young and it doesn't matter. Or even better, teach your kids not to make those mistakes in the first place.

Start young and often.

My parents did really good with me. But they didn't teach me much about investing (I recently learned that they pooh pooh the power of compounding, and that is probably why. They just never had that advantage and they don't know what they missed). But you can start investing small amounts when your child is little and SHOW them the power of compounding. That is the one thing I am adding to my parenting - teaching my kids about investing.

Likewise, I would teach kids anything an adult show know. I mean my parents educated me on cars when I turned 16 and mortgages when I was ready to buy a house. A lot of that stuff you don't need to know as a pre-teen. But basic money management and budgetting and investing, all of that should be started quite young. Good habits will likely carry over to adulthood.

[red92s]

Showing young people (probably high school) a compounding table for a 40-50 year investment sends a very clear, very powerful message about the value of investing early . . . I started at 23 and wish I had done it 5 years earlier!

[moneybags]

My 5th grader is tracking stocks in math class. We had a big discussion on stocks, mutual funds, dividends, gains/losses, tax consequences, etc.

[Spud]

Joe, when you complete your booklet, I hope you will create a HTML version and share it with all of us.

[maat55]

At half.com, I just ordered a book called Rich Dad Poor Dad what the rich teach their children about money. There is a series of these books. I bought it for .75 + shipping.

[jIM_Ohio]

The younger a person learns something, the more likely what they learn will be part of their personality.

I would teach kids a few basic principles

1) exponetial growth (positive and negative). Make sure they can calculate the interest paid on something at a given moment in time (debt and investment). Then explain how this compounds when repeated.

2) risk and reward. I think this is the skill missing in most people when they do not invest. Explain risks (return, market, inflation, interest rate, time) and explain how to counter those risks.

3) budgeting. Teach them to spend less than they earn and balance a budget. Use investing to teach them how to increase their purchasing power.

4) politics- explain how various political events have impacted finances. Use this to teach them to vote appropriately.

[76Chick]

ditto to what jIM Ohio mentioned...
I am struggling with this right now - long story short, I do NOT want my kids to mimic what we have done in the past.
They did just both get cell phones (they were free, and only 10/a month - all numbers but our family are blocked, and thankfully, they are all IN our network)... but they know that a part of their allowance has to go to Verizon. When the payment comes due, I will be driving them to our local store to make their payments. So they know what it feel like to actually take their 10 dollars and pay it towards a bill. We will see how it goes!

[yayme1227]

I wrote out a big long reply then realized it is just basics for children.
My idea was more for teens/college age. So, disregard my reply.

[CreditExpert]

I think to budget is one of the most important things they can learn. I think if you take a survey it will show that good financial planners all have a buget and bad ones not