Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, October 25, 1993 TAG: 9310230062
SECTION: MONEY PAGE: A-8 EDITION: METRO
SOURCE: MAG POFF STAFF WRITER
DATELINE: LENGTH: Medium
And the key to their education is to set a good example in the way you manage your own household finances, according to the Virginia Society of Certified Public Accountants.
The accountants said one of the best ways to develop money-management skills is to give children a fixed allowance.
Start their allowance when the children are about 6 years old. By then, the accountants said, they are learning about the fundamentals of money in school and already have some understanding about how to make simple purchases on their own.
Designate a specific "allowance day," and stick to it each week.
Along with the allowance, you must give the children the right to make decisions about how they will use that money. Emphasize to them that it is their money to manage.
But try not to be concerned if your children initially spend all their allowance money the first day or two after receiving it. The accountants said this will help them to understand better the consequences of their spending habits.
You must, therefore, resist the temptation to lend your children money once their allowances are gone. Bailing them out doesn't help them develop a responsible attitude toward money. Nor does it teach them to live within their means.
A second step is to set up a savings account for them at a bank. Nothing makes children feel more in control of their finances than having their own savings account.
You should discuss the benefits of regular deposits in an account and the way money can grow by earning interest.
Let your children determine how much of their money to put aside in savings. And let them decide when they will withdraw the money and for what purchases.
Even if you don't agree with your children on how they want to spend their savings, they will learn valuable lessons about managing money by making their own decisions.
As children grow older, you may want to explain the need to save for long-term goals such as a car or college education.
If you expect your children to save for these expenses, reward them when they reach their savings goals. You may, for example, contribute money to their savings account each time they reach a certain savings threshold.
Finally, you should make money management a family matter.
Encourage open discussions about money. Be as direct and honest as possible in answering your children's questions about household finances.
You can enhance your children's understanding of the role money plays in our lives by involving them in family financial situations and decisions.
Remember, too, that the way you and your spouse handle money influences your children's attitudes about money.
As an example, if you continually use credit cards instead of cash to pay for purchases, your children may grow older feeling that they have the right to do the same thing. And they may very well not think about paying the ultimate expense of the items they purchase.
It is up to you to explain this money-management tool and how it figures in family finances.
The CPAs said that children who are involved in family financial matters, even to a limited extent, are better equipped to deal with a financial crisis, such as a parent's job loss, if that should occur.
by CNB