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BTparent Series

BTparent Series

Part I

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Modeling Smart Money Habits at Home
Today’s kids are growing up in an era of relative economic prosperity.  As a result, they:

  • Have money and spend it. But who teaches them how to limit their spending or how much to save for the long-term?
  • Watch parents use ATM’s – magical sources of money. Who brings home the hard lesson that earnings make those withdrawals possible?
  • Use their parents’ credit cards or have their own. Who teaches tweens and teens that plastic transactions create debt? That debt eventually comes due.
  • Are impressionable, easy targets of the marketplace. Who helps kids judge when they have enough? Who helps them distinguish between needs and wants?
  • Are tech-savvy enough to bank online. But there’s more involved than wielding a mouse. Who explains the basics of earning, saving, investing, debt, and spending? Who teaches teens how finance charges or interest rates can add up? Who shows them how to keep track of their checking accounts?

Too often the answer is “no one”. Annually, $tart Coalition for Personal Financial Literacy measures the nation’s 12th graders’ knowledge of personal finance. Since 1997, the overwhelming majority of students have failed the test. Yet with each passing year, kids are breaking spending records.

Our kids can tell us all about the “latest” and the “hottest” in the marketplace. They are steeped in advertising. Yet research shows that they know very little about handling money. For example, according to one survey, huge numbers of the nation’s kids don’t know they should pay more than the required minimum on their credit card balance.

If kids carry such habits into adulthood, they are going to be making mistakes that have serious long-term consequences. One consistent result in the $tart Coalition survey cited above is that students say that they learn about managing money  “at home from my family”.

During January – March, 2017, the theme for EFBC’s Building Together Campaign is “Building Together is for families too!” As a part of that emphasis, a series of articles on teaching children about money will be distributed to EFBC families with preschoolers or elementary-aged children.  The articles are adapted from a series in Parent's Magazine and are being distributed with the prayer that they will be a blessing to EFBC's parents as they seek to develop their children as faithful stewards.  

  • Part I
    MODELING  SMART MONEY HABITS AT HOME
      
  • Part II
    MONEY TALKS FOR PRESCHOOL, CHILDREN, & TEENS
     
  • Part III
    SEIZING EVERYDAY OPPORTUNITIES FOR “MONEY TALKS”  
     
  • Part IV
    USING ALLOWANCES TO TEACH CHILDREN ABOUT MONEY

MODEL SMART MONEY HABITS AT HOME

It has been said that “Children are great imitators”.  So, give them something great to imitate. 

As parents, we know our children observe our every action, including gaffes that we hope will go unnoticed. We have those hopes because we know that our actions speak loudly.

Surveys routinely reveal that parents have the biggest influence on the way kids save and spend money, more than friends, celebrities or their teachers.  Believe it or not, parents shape the way children manage money more than anyone or anything. They actively absorb the way that moms and dads pinch pennies or make mistakes with money.

QUESTIONS TO CONSIDER
Modeling “money smarts” takes a serious parental commitment.  Parents should consider the behaviors that they’re modeling to their kids by asking themselves: 

  • Do my kids see me economize?
  • Do they see me shop more often at outlet malls or high-class boutiques?
  • Do I suggest that shopping is entertainment?
  • Do I wait for an item to go on sale?
  • Do I regularly clip and use coupons?
  • Do I send in rebate offers?
  • Have my children ever seen me save up for large purchases or do I whip out the plastic when you see something I want?
  • When I make large purchases, do I research brands and features?
  • Do I comparison shop with my kids to underscore the seriousness of the purchase?

TEACH THEM CAREFULLY
Modeling money smart behavior doesn't have to be complicated; there are many simple things parents can do.

  • Involve kids in everyday conversations about money.  Use real-life situations to help them learn lessons.
  • Use the grocery store as a classroom.  Talk through purchases with young shoppers and help them weigh all factors that go into a purchase decision.
  • Extend the grocery store lesson to the shopping mall.  Reinforce smart spending, not immediate gratification. Wait for discounts, save for items and pay with cash instead of plastic.
  • Emphasize planning.  Make a list before you enter a store to teach children to focus on needs.

Modeling money smart habits to children – aligning your actions with your words – brings the lesson home.  Start early, and you’ll lay the groundwork for financial security later on.

BTparent Series

Part II

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Allowances can be useful in teaching your child how to manage money, but they raise questions:

  • When to begin?
  • How much to give?
  • Do you supplement allowances with spending money?
  • When do allowances stop?

Use these questions and the discussion below to guide a conversation about how to handle allowances in your family. Families are different and must decide for themselves what to do about allowances.

When to begin?

Some parents begin allowances as soon as children can recognize the different values of coins. What can a preschooler need that is not provided by parents? Not much. The idea here is to help your child learn balance: spend some money, save some, and give some away. Some parents want to start these habits as early as possible. Others wait until grade school – those parents feel that grade schoolers have a better understanding of money and how it can be used. Let your child’s grasp of the concepts be your guide.

How much?

The pat formulas offered by some experts are not always realistic. The amount you give your child depends on three factors:

  • The economic climate of your neighborhood. What are other children getting? Different cost-of-living levels characterize neighborhoods.
      
  • What the allowance covers. The financial responsibilities of your child should grow as they age. In the early years, the allowance may be used for incidentals only, but later, it will have to fund clothing purchases, entertainment and daily miscellaneous purchases, and, perhaps, gas, and auto insurance. Being financially responsible usually makes kids respect the items they buy and teaches decision-making. They will learn very soon that money is limited.
      
  • Other considerations. If you do not give enough money for older children to learn to save some for long-term purchases, spend some money during the month, and, make gifts to their church and, possibly, other charities, you are not providing a balanced learning experience.

How often?

When children are younger, allowances should be paid every week. As they become teens, you might consider shifting to a monthly payment. Being paid once a month more closely approximates the real world, where paychecks and bills come monthly. Plus, increasing the time between payments also increases responsibility to stretch those dollars. If your teen has buzzed through his or her spending money by the 10th, waiting for the 1st of the month can be a long time.

How long?

Most experts agree that you should begin to reduce the amount of the allowance when your child starts to earn money at a part-time job. At that point, the money burden is beginning to shift from inside the family to outside the family.

“Spending” money?

Do you supplement allowances with spending money? Spending money is the money you give your kids to spend on a specific thing or event. It’s Saturday and a bunch of kids are going to a matinee. You shell out $15 for the ticket and popcorn. If you supply spending money, then perhaps allowances should not be so generous. After all, you're taking care of entertainment expenses as they arise.

Allowances tied to chores?

This is a major controversy. Examine both sides and then make up your own mind.

  • Pro-chore advocates. On the one hand, some experts say that kids need to learn the connection between money and earning it. Tying allowances to chores does that. The message to kids is that you earn the allowance – you are not simply entitled to it. The real world expects work in exchange for money.
      
  • The anti-chore advocates. What happens when kids don’t do the chores? If you dock their pay, you’re depriving kids of their money management lesson, which is supposed to be the purpose of allowances. Another problem: where does paying for chores end? Do you pay kids for everything they do around the house? Does paying for chores teach kids to expect pay every time they contribute to the good of the family? That’s not realistic. Who pays a parent for doing the laundry and shopping? Kids must help with the running of the household. Bigger chores that occur only periodically such as washing windows or raking leaves may deserve pay.

Other Suggestions?

  • Pay on time. It’s a way to teach your child that commitments must be kept and that people depend on one another.
      
  • Don’t cave. Here’s the scene. Your teen asks you for an advance. He’s worked his way through his spending budget, and this great opportunity has come along. If you cave in, he misses the lesson of keeping money in reserve for unanticipated expenses. Bail him out often enough, and you undercut the lesson he's created for himself.

Look at the issues, and talk them over with your spouse. See what fits your philosophy and works best for you.

BTparent Series

Part III

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Our days are full of opportunities to teach our kids about money.

Sometimes we don’t recognize situations as “teachable moments”. Sometimes, we may see an opportunity, but we’re too rushed to take the time to talk about it – so we let these valuable real-life lessons slide. If we don’t take the time to use real-life situations, how will kids learn the money lessons they need as adults?

Do you recognize opportunities?

  • When you watch TV together with younger children, do you play devil’s advocate to the ads that pelt your kids every few minutes? You can help make kids less accepting of what they see.
      
  • The plots of TV programs can portray a situation realistically or ridiculously, leading to an opportunity to talk about earning, saving, or spending. You can help your kids recognize the difference. Do viewers ever see characters working for a living? How do they afford their lifestyle? Do they evidence good decision making techniques?
      
  • Most families still spend a lot of time in the car going to and from places. Being locked in a vehicle can means you pass billboards, stores, or listen to commercial messages. Do you occasionally use this time or these circumstances to advantage? Or do you sit in silence while your kids are plugged into games or music?
      
  • Are you cleaning the garage, attic, or closets together? Use the opportunity to talk about how much of this stuff was actually needed, bought because it was a fad, or proved to be a bad purchase – for whatever reason.
      
  • Sometimes the best discussions begin spontaneously over hamburgers or tacos as you catch a meal on the go. Are you alert to ways to talk about money when the topic arises naturally during the conversation?

Use shopping time to teach:

  • Do you take kids to the store with you and talk about purchases with them? Do you talk about why you choose one product over another?
      
  • Do details play a role in your purchases? For example, do you read labels to check price per ounce? Do you check for quality ingredients? Do you read clothing labels? For example, you might suggest why a light-colored jacket that must be dry cleaned is impractical for everyday play wear.
      
  • Do you brag about things you find on sale? Is saving money a cause for congratulations?
      
  • Do you talk about value, examining a product to compare what you are getting for the price? Do you examine several items to compare value before you buy?
      
  • Do you explain steps you take to economize, such as buying a store brand that is just as good as a name brand, for example?
      
  • Do you explain about trade-offs and having to make choices when you buy? “I think all of those extra features on that model are great, but I don't really need them, and they drive the price up significantly. I'll take the less expensive model.”

Use bill-paying time to explain money management concepts:

  • Have you ever listed all the expenses you pay every month to keep a household going? When the stubs are staring you in the face, put a few in a stack and do a little show-and-tell. Talk about what happens when you add them all up.
      
  • Do your kids understand why you ask them to turn off running water, lights, and TVs, when they're no longer being used?
      
  • Have you told kids why they need to value things around the house? Do they have any idea how much it would cost to replace damaged items?
      
  • When you have large, unexpected expenses – unanticipated car repair or air conditioner breakdown – do you hide the expense from your kids or do you ask for their help in economizing to help meet the need? It's another way to deliver the “money is limited” idea.

Use major purchases to weigh purchasing decisions out loud:

  • Do you research brands and features of purchases at home before you buy? Do you report to the family on your findings? Do you take kids with you when you comparison-shop to underscore the seriousness of a purchase?
      
  • Do you talk about the pros and cons of a purchase with the family so that kids see you weighing alternatives among models and prices?
      
  • Do you see something in an ad, and impulsively jump in the car, and bring it home? If so, don't take the kids along.

Model good spending behavior:

  • Do you ever say things that would give your kids a sense that money is limited?
      
  • Do you wait for a sale?
      
  • Do you save up for something so you can pay cash?
      
  • Do you ever say “that costs too much - I’ll have to find something else”?
      
  • Do you model immediate gratification?

BTparent Series

Part IV

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How well and how often do you work money management topics into daily conversations with your kids? Here’s a chance to evaluate your efforts.

Start now:

Don’t avoid talking about money just because kids are young. Simple lessons about money should start early in your child’s life and become more complex as your child matures. Consider how you might talk to kids of different ages about a Rainy-Day fund.

  • Very young child: You might say that “extra money” works like an umbrella that keeps you dry in a storm. You’ve got it when you need it. Talk about how having change in your pocket enables you to buy a bottle of water when you're thirsty.
      
  • Slightly older child: You might talk about a “just-in-case” fund used to get out of minor trouble. Good thing I had some money in my pocket because I couldn’t find my movie ticket, and I had to buy another one.
      
  • Older child: Kids should know that such a fund provides security to live without borrowing when the need for money arises. The refrigerator cannot be repaired and you must buy a new one. Because you have the money, you don't need to pay interest on a loan in addition to paying for the cost of the fridge.

How well do you think you are doing? What money-related topics do you talk about? Consider these “Topics for Talks about Money” for conversation-starters:

  • Why money is valuable. It’s not just for spending. Money provides security now, and in the future. Money gives you choices in life and in times of emergency.
      
  • Where money comes from. How people earn money, the many jobs out there, and how education links to earning power.
      
  • Where money goes. It’s not just for pleasure and entertainment. It buys heat and electricity, lawnmowers, plumbing services, dentist visits, and roof repairs. Kids should know that money must be set aside for such things.

  • Why saving money is important. Money is needed for emergencies and unexpected things, like the hot water heater that fails. Money is saved for the future too: like college educations and retirement.
      
  • What happens when you borrow money? Do kids know that banks loan money and how a loan works? Do your kids know that using credit cards is the same thing as taking out a loan? Do they understand that they must pay interest on any portion of the loan that is not paid? Do they know how interest can add up? Do they know about penalties for late payments?
      
  • Why everyone needs a Rainy-Day Fund. Do you share stories about how unexpected expenses can put pressure on people? How you would need money on hand if the air conditioning breaks down in the middle of a heat wave? If you don't have the money, you must borrow it, which makes the purchase even more expensive.
      
  • What it means to invest money. Do you talk about how to make money work? Have you explained a savings account, a CD, a bond, or stocks?
      
  • How to be thrifty. In our consumer society, thrift is practically a word that has dropped out of our vocabulary. Do you talk about stretching your dollar? Do your kids know what “value” means? Do they know how to look for value when they spend? Can they judge a purchase on its merits? Can they judge the quality of a product or are they blinded by a label’s name?
      
  • Controlling spending. Have you explained the difference between needs and wants?
      
  • Budgeting to set limits on spending. Do you ever say to your kids “We can’t afford to do that right now – we have to use our money to…” Or “That’s more money than we can spend. We’ll have to save up for that.”
      
  • Delaying gratification. Have your kids ever watched you deny yourself something you wanted? Have they watched you “wait” to purchase an item or watched you “make do” until you had the money to buy what you need?

Thank you for taking time to read the BTparent Series. We hope you have found these articles helpful and that they have prompted some concrete actions to help your child learn how to handle money wisely. This series was produced as a part of Edmond's First Baptist Church's BUILDING TOGETHER emphasis and especially, in support of our Pastor’s $1 Million Dollar Challenge (BTchallenge).