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Spending, Saving, Sharing: Teaching Kids About Money

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Teaching children the value of money and the importance of smart spending, frequent saving and even philanthropy can be challenging in today’s world. From a young age, kids are exposed to marketing messages telling them to buy more, want stuff and spend money.

Messages about saving money and the rewards of delayed gratification are few and far between, but nurturing healthy money habits can begin very early in a child’s life. Children as young as three years old can grasp financial concepts such as saving and spending; a report by researchers at the University of Cambridge commissioned by the United Kingdom’s Money Advice Service revealed that kids’ money habits are typically formed by age seven.

Parents need to take action when it comes to teaching children about spending, saving and sharing the money that comes into their possession; here are some creative ways to do so.

Ask any three-year-old to choose between a dime and a nickel and they will likely pick the nickel because of the larger size. But as children get older, parents can begin to cultivate healthy money habits in a variety of ways, and one of the best is to have honest money discussions. When Grandma and Grandpa send a crisp 20-spot as a birthday gift, the child’s first instinct is probably going to be “Let’s go shopping!” Twenty minutes later, with every dollar gone, the child happily returns home with an armload of impulse buys that will likely end up under their bed or in the trash in a few short days.

Instead, parents can encourage their kids to take the time to pause and truly think about what they want and need instead of buying just for the sake of buying. If there isn’t anything specific they want, then their trip to the mall is going to be more about the “getting” than the “having.” In an instant-gratification-world of credit cards, teaching kids to think before spending also works to curb impulse buying and to cultivate the benefits of delayed gratification. This is also a good time to implement a “spend half/save half” money habit with young future shoppers.

One of the most useful and fun money-saving tools for kids is the good-old-fashioned piggy bank. Many parents buy a piggy bank for their child and show them how to put their money “in the bank.” Although it’s a great idea and an excellent start to educating young ones about money, the concept of saving can be lost. A clever work-around is to purchase two banks, one for saving and one for spending. Label each piggy bank with the appropriate name, and when your child comes into possession of some funds, which could be allowance or birthday or extra chores, this practice of dividing up their bounty will help them learn that some can be used for fun right now and some can also be set aside for later.

If your child has outgrown saving quarters and dimes in a porcelain pig, then it’s time for the next step. Most experts agree that somewhere between the age of seven and ten is a perfect time for a child to acquire their own savings bank account. Parents can assist by helping their kids open a savings account at the local bank and encouraging them to make regular deposits. These accounts are also a great teaching and motivation tool for the child who has ambitions of owning bigger-ticket items such as bikes, electronics or special trips, as well as the financial principles of compound interest and what banks do with their money.

We’ve all heard the heart-warming stories of youngsters who cracked open their piggy banks to buy gifts for police officers or of little girls who asked party guests to bring goodies for the local animal shelter instead of presents for the birthday girl. These stories are wonderful to hear, but they did not happen by accident. Teaching kids the habit of being givers instead of receivers takes time, discussion and encouragement. The best way to start this healthy habit in children is to lead by example.

According to Talk about Giving, an initiative begun to encourage families to hand down the habit of giving from one generation to the next, 71 percent of adult children with philanthropic parents go on to be philanthropists themselves, while only 47 percent children of parents who do not give become philanthropists. Parents can begin by talking with their youngsters about charity, what it is and how it fits the world we all live in. Parents can then let them choose what charity they want to support and let them have the control in making decisions about how much and how frequently to give. Passing along charitable values to future generations is a great way to leave a legacy, and by raising the next generation of philanthropists, you’ll have the satisfaction of knowing that the world will be in good hands. ■

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