Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, January 9, 1995 TAG: 9501090012
SECTION: BUSINESS PAGE: 6 EDITION: METRO
SOURCE: MAG POFF STAFF WRITER
DATELINE: LENGTH: Medium
But most children are not ready to learn how money is earned, saved and spent until they reach 6, according to the Virginia Society of Certified Public Accountants.
The accountants recommend that parents take an active role in teaching their children good money-management habits. These lessons will help children understand the importance of saving their pennies now and help put them on the road to achieving financial security as adults.
By the time your children are in elementary school, it's important to let them know that money is not unlimited.
One way to accomplish this, the accountants said, is by having them assist with grocery shopping. Let them know that there is only a limited amount that can be spent on weekly shopping. You can allow your children to keep track of how much money you're spending and have them tell you when you reach your limit.
Go through this process again when you buy your children clothes. Once you involve children in excursions like these, they will understand spending limits better. They may even come up with their own ideas for saving money.
An allowance should not be used to reward or punish your child, but rather to provide a means for children to learn how to manage their own money.
Child experts disagree about whether an allowance should be provided in exchange for chores around the house. However, financial experts, including the CPAs, agree that an allowance should be provided regularly, such as weekly, and that the child, not the parent, should determine how the money is spent.
The CPAs said the best time to start a child on an allowance is about the age of 6. When you provide the allowance, also give the child advice as to how the money might be saved or spent.
Don't bail out your children if they spend all their allowance and need extra money for a movie or a gift for a friend, the CPAs advised. Your children will learn the importance of money management by experiencing first-hand the consequences of spending unwisely.
Don't just tell your children to save money; show them how. When they are about 7 or 8, the CPAs said, it's time to get some of their money out of piggy banks and into savings accounts at banks or thrifts.
Encourage your children to make regular deposits, and take your children to the bank with you so that they are actively managing their own financial affairs.
You may want to match the amount of money your children deposit in order to encourage saving, the society said.
And you should recommend that your children save money in their bank accounts for some special purchases, such as a new bicycle, stereo equipment or other big-ticket items. This will teach them to set financial goals and help them to develop the discipline necessary to meet those goals.
Even if your child has saved only a minimal amount of money, it's worth the time to review bank statements and explain the concept of how money can grow by earning interest. Sooner or later, the CPAs said, most children realize that it's a good deal to be able to earn money just by letting their savings sit in the bank.
As your children get older, introduce them to other investment vehicles, such as stocks and savings bonds.
Instead of giving your children video games or clothing for their birthdays, give them savings bonds or stock in a company they recognize, such as a fast-food company or a toy manufacturer. This will help them to understand basic investing concepts.
Finally, the CPAs urged parents to remember that the way children save, spend and invest their money can be greatly influenced by your own financial habits.
By setting a good example, you will let your children know that money must be managed and that it grows through saving and investing.
by CNB