How to Raise Money Smart Kids

Every day, your child gets bombarded with commercials telling them they must have this and that life is worth nothing without that. So how do you make sure that he grows up to know the value of a buck, work hard, pay his bills and not be taken in by cons and harebrained schemes and commercials? According to the experts, the answer lies in a simple truth – “You can't teach children to be responsible about money until you teach them to be responsible, period.”

Difficulty: Moderately Challenging

Instructions

1. Teach him to make good choices, and let him understand that once a choice is made, he has to live with it. It’s something kids can begin to learn as young as 18 months. Basically they get a choice between the blue or red coat. They learn that although there isn't always one right choice, there may be one that's better than the others.

2. Set reasonable limits – the experts say do it one limit at a time, so basically if your daughter refuses to put away her clothes, then fine her $1. If money doesn’t do the trick, restrict TV or computer access. Outside the home, do what you can to control their surroundings--by not allowing them, for instance, to play at the homes of kids who spend all afternoon staring at the TV. Unfortunately, this will only work until your child hits middle school, when rebellion and pressure hits. At this point you will probably have to be the bad guy, especially if other parents have values that conflict with yours.

3. Give your child an allowance, but don’t link it to chores. Your kids might decide that they don’t want to do the chore and you can keep the money. This means your child would continue to bug you to get them stuff. The idea behind an allowance with discretionary money of their own, they buy what they want themselves, and when it’s gone it’s gone. The downside is this money is theirs. If your daughter chooses to save it, then fine. However if she choose to blow it all on that perfect skirt, no matter how ugly, you keep quiet.

4. Teach them how to wait and not immediately buy something they want. For example if your son wants the latest video game, don’t automatically get it for him. Let him wait and build up his allowance until he has enough money to buy it himself. At the same time, work with him to shop around, so he can get the best price for the game.

5. A child values something more when she works for what she wants. Working in high school and college--to the extent that it doesn't interfere with schoolwork--seems to pay off later in life, the experts say. According to a study conducted by Roper ASW in 2003, people who worked in high school are much more likely to achieve their financial goals and be knowledgeable about money than those who did not.

6. Be consistent and stick to your guns. When you start your kids on an allowance, you give it to them on time, in full and as promised. But it also means that if you insist that they save part of their allowance or give part of it to charity, they see you saving and giving as well. Finally don’t give in whenever they try to talk you into buying something, even when they scream at you asking, “What kind of parent are you?”