Kids and Money solutions including age appropriate tools for parents

By Michael T Kastler| Budgeting Money Tips

Now is the time to start training up your child in the area of finances.? It doesn?t matter how old or young they are or how little or how much money you have.? If you instill good financial habits now, they will last your child a lifetime.

This article on Kids and Money is built on the President?s Advisory Council on Financial Capability?s recommendations. ?According to the PACFC, kids should start learning about money as early as 3 years old.? Check out moneyasyougrow.org.

In general, most K-12 schools do not offer education in money, saving, personal finance, budgeting, balancing checkbooks, or any other aspect of how to become a good financial steward.? It is up to us as parents to instill good habits, so that when our adult kids come home to visit, we can enjoy their company and not feel like the ?Bank of Dad.?

Look for a good program that will teach kids the value of money, how to set goals, and track their goals and spending.? There are tools available to help parents teach kids about money at age-appropriate levels. Start early and keep expanding the program as they grow older and start to earn their own paycheck. ?Learn how to create your budget as well to set a good example.

According to PACFC, there are 4 age group appropriate tools available to help you get started training up our kids.? Earnings (for jobs well done), Saving, Tithing/Charity, Spending, and Investing are basic to instilling good financial habits for kids of any age. ?The rest of this article discusses our Kids and Money solutions for these age groups that parents can use with their kids.

Kids and Money:? Ages 3-7

Earnings vs. Allowance, Value of Money

Most kids get a weekly allowance without any accountability and are free to spend as they wish.? Or some parents simply buy anything their child wants at any time.? There is an alternative even at these early ages.

Kids can learn the value of money by earning it for doing some simple chores around the house.? A written chore program with a small reward attached can be just the incentive to help teach your child how to be structured and learn the value of money at the same time.

In my budgeting worksheets for kids, I have 2 chore sections.? One section is for the chores that are mandatory with no financial reward and the other section is for chores that are rewarded with a small financial earnings (reward).? Check out an example of our budgeting worksheets for children here.

For very early part of this age group, you can substitute ?Mommy Cash? instead of real cash.? This allows the parent to decide to reward the child with tokens that can be traded in for an extra privilege such as play time, instead of cash.? Post a new colorful chart on your refrigerator every week.? Each week is a new beginning.

Kids and Money:? Ages 8-Teens

Savings, Goal-Setting, Needs vs. Wants, Tithing/Charity

This is a great period of time to begin instilling the value of saving, goal setting, priorities, and tithing.? Your child will begin to distinguish between needs and wants when they have only a limited amount of earned money to spend.? I recommend a similar type of earnings reward program for kids as above, instead of traditional allowance.? Bump up the chore levels to be age-appropriate work around the house and possibly even in the neighborhood to help out single moms or the elderly.

A good budgeting program should include a goal-setting feature, such as this budgeting worksheet for kids.? Work with them to set realistic goals, set portions of their earned money toward those goals, and watch their excitement grow as they meet those goals.? A good goal-setting budgeting program will have a Progress Chart so that your child can see their weekly progress.? Post it on the refrigerator and make it a part of your daily conversation.? 80% of their earnings can go towards their short and medium term goals.

Encourage your youngsters to put aside at least 10% (a good benchmark through adulthood) of every dime they receive for long-term goals.? The money can be put in a local bank or credit union for saving for special items such as a car, or some other long-term goal the child sets.

Designate the remaining 10% percentage for charity or tithing to a church. ?Teaching them to ?give back? is a reward in disguise as they learn how to help other people, causes and organizations will make them feel good about themselves and part of a bigger cause.? Show them videos of some really poor parts of the world.? They?ll be glad to give!? Ten percent is a typical amount and recommended by most church organizations.

There are plenty of churches and organizations in any local community that would be glad to receive the blessing.? Also check out Kiva.org, a website for providing microfinance loans to low-income individuals around the globe that don?t have access to banking services.? Your son or daughter will glow talking about this with friends and family.

Once kids in this age group see their earnings adding up, goals being met, and community improvements, you?ll be surprised how eager they will be to earn even more money ? a good start before they even earned their first paycheck!

Kids and Money:? Working Teenagers

Taxes, Credit vs. Cash, Compound Interest, Time Value of Money

The first paycheck is always a shocker ? taxes!? Take some time to explain the individual tax categories, withholding allowances, and the impact on net pay.? Gross pay minus taxes equals disposable income.

This is a good time to upgrade their budgeting skills with a worksheet they can manage on their own.? Our simple budgeting worksheet for teens can be seen here.? It still contains the goal setting and progress tracking sheets, as those techniques should be carried out throughout their lifetime.

With a regular and higher income stream coming in, your son or daughter will be tempted to spend, spend, and spend more.? On top of that, your working teen will be bombarded with credit card offers almost daily, sucking them into their credit card ?have it now? schemes.? The temptation is to buy items you can?t afford by using credit cards.? This is a critical stage and if all went well in the early years, it shouldn?t be too hard to convince them not to fall into these marketing traps.

Above all, now with more disposable income, the key at this age group is to learn the power of saving, compound interest and time value of money ? very powerful principles for long term savings and investing.? Consider retirement, your son or daughter will have 50 years until they retire.? That?s a lot of time for their money to work in an IRA.? Companies are not providing for retirement like they did in the past.? It?s upon us to plan accordingly.? Encourage working teens to put small amount put aside each month in an IRA that will grow significantly over such a large time span.

Kids and Money:? College Students

Financial Stewardship

Now for the really fun part ? not!? Helping your son or daughter to navigate through all the career options and financial institutions, comparing costs and reality vs. what they want can be a daunting task.? This is where all the previous learning and tools can be brought together to a head.? We?re now talking about being a good financial steward ? using our financial resources prudently and wisely.

The easy way out is student loans.? But do you really want your adult kids to be saddled with tens of thousands of dollars in debt before they even get their first paycheck?? I can think of several kids coming out of college with $80,000 in debt with only a hope of getting a $60,000 per year job.? That just doesn?t make sense.

Another popular solution is for the parent to raid their retirement funds to pay for college ? but you would never do that if you knew the real cost!? Carefully consider not just the amount you are withdrawing but also the amount of growth you are missing out on.? It can be 2-3 times what you think it is considering compound interest and time value of money.

There are a lot of financially prudent options.? Consider the first 2 years at a community college.? Consider working through school, even if it takes longer to get through.? Consider working 2 years first before starting college.? You and your son or daughter can come up with a plan that works out well given your financial situation, without taking student loans.

To help sort through the expenses including living away, food, rent, books, fees, car insurance, etc. these kids need to think and act like adults with special financing needs.? Get organized by putting all this down on paper or a budgeting spreadsheet designed specifically for college students.? Of course, we have one here for your evaluation.

Working Adults

Educating, Mentoring, Financial Stewardship

I?d be remiss if I didn?t express how important it is to set the example for our kids.? What we do is far more important than what we say.? Consider your own personal finance plan.? Do you have a good budget in place?? Are you avoiding credit cards?? Do you have your short term and long-term goals clearly stated in writing?? If not, it?s never too late.? Putting a plan in place takes a little bit of work up front, but can be fairly easy to manage and modify over time.? Check out our budgeting worksheets for working adults. ?Being a good financial steward as head of your household will yield offspring with similar qualities.

Next Step for Kids and Money Basics

Any time of the year is a great time to take inventory of your family?s current financial position. ?As Chris Gardner says in the title of his book, ?Start Where You Are.? Check out the Personal Finance programs on the market that are geared towards family.? Be sure to consider our Family Series Budgeting Programs and these Special Offers found on our website.? Back-to-School time is a good time to get started teaching Kids and Money basics! If you need additional one-on-one coaching, we can help you with that too with our Budgeting Coach Services.

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Michael T Kastler is a Budgeting Coach, author of a personal finance book, ?Get a GRASP on Your Budget and Your Cash? and multiple Family Series budgeting worksheets. His budgeting money tips blog that helps individuals become debt free and meet their financial goals can be found at http://www.budgetingmoneytips.com

Source: http://www.budgetingmoneytips.com/archives/2602

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