Few topics are as hard to talk to children about as money. Maybe it's because most of us aren't confident about the subject ourselves.
Instead we avoid certain topics, such as how much we earn, what food and housing cost, and our financial arrangements for the future. By dodging these subjects we set up our children to be as financially confused as we are.
Just because we aren't teaching our children about money, doesn't mean they aren't spending it. According to a 2007 CBS News story, children between 8 and 12 spend $30 billion of their own money every year.
Fortunately, the biggest influence on how children spend is not advertising, friends, or TV programming. It's you.
If you want your children to be financially responsible, show them how.
Start with an allowance
An allowance is an opportunity for your child to learn about income and budgeting, and is a way for you to get some relief from their requests for money and purchases.
Generally, if a child is old enough to ask you to buy things, he or she is old enough for an allowance. Even preschoolers can handle small amounts of money for personal purchases.
Now, how much?
Depending on you and your family's financial situation, try 50 cents a week for each year of age (an 8-year-old would receive $4 a week). Or give your child an amount equal to his or her grade in school ($3 a week for a third grader).
Set a budget
Help your child learn to manage money by setting a budget. List all of the expenses you have approved and how much money should go to each, balancing savings, charity, and gifts with fun items.
Whatever budget you set, stick to it. Children are less likely to hold on to their money if they know you will help them when they run out. If your child runs out of money, use it as an opportunity to talk about the consequences of overspending.
Once they live with a budget, children quickly discover they don't always have enough money to buy what they want when they want it. Helping them work toward bigger purchases can be a great introduction to saving.
Start with a piggy bank or children's account at your personal bank. Show your child how to keep track of deposits and interest by looking at their account online. You may also want to help your children find ways to earn extra money to reach their goals faster.
Practice, practice, practice
By starting young, children have a chance to practice financial skills they'll need as adults. Besides budgeting and saving, you can introduce them to "grown-up" tools, such as checking accounts and debit cards. Many banks offer youth or teen checking accounts that allow children to learn how to pay bills, balance accounts, and use ATM and debit cards wisely, all with your oversight.
With a little help from you, your children will develop good financial habits now that will last them a lifetime.
This article was written by Alan Boggs, Riverside Bank president in Brevard County.