Dollars and Sense
By Shelby White
Living through the experiences that inspired me to write What Every Woman Should Know About Her Husband’s Money (Random House, 1995), I realized that we all need to know how to handle finances. And trust-fund babies, especially, need to develop a framework of values along with basic money-handling skills. Needless to say, this doesn’t happen by itself. By the time children reach adolescence, their parents should be actively involved in helping shape their attitudes toward money. Thinking now about how best to convey your ideas and values regarding saving, investing, spending, vacations and inheritances will pay big dividends as your children grow older.
The Value of Values
Teaching children about money in an affluent society is like teaching them about sex in a promiscuous world: What you do matters as much as (or more than) what you say. If you judge people by the weight of their Rolex watches, so will your kids.
Teaching your kids about limits will, in the long run, teach them to manage financial independence. When teens see you buying Gucci, but you’re sending them to the Gap, you have to explain about age-appropriate choices. Tell them they can buy more expensive clothes when they are older an earning their own money.
A few don’t; Don’t give your kids money or buy them the latest video or T-shirt just because you can afford to – and don’t feel guilty about saying no. Check with other parents about spending levels, then set s tone that feels right for you. Don’t put a price tag on love by giving your children expensive gifts instead of spending time with them. Also, don’t give or withhold money as a sign of approval or disapproval. Don’t, if you are divorced, outspend your ex-spouse in an effort to buy affection. Your kids will just play you against each other and wind up spoiled. Finally, don’t make money a gender issue – it’s not just for boys.
How to Handle Money
A survey by The JumpStart Coalition for Personal Financial Literacy, a Washington-based education group, revealed that most twelfth graders aren’t able to make critical money decisions. The message is clear; every kid needs hands-on instruction about budgeting, checking accounts and credit cards. Pierre Haber, P.H.D., director of the New York-based Psychology Society, says that giving kids an allowance helps them learn independence. Even if they waste it, they’ll learn a lesson. An allowance for discretionary items, beginning when your child is 6 or 7, is a good start. (Giving one to younger kids might make money assume too much importance in their lives.) As kids get older, the money might start to cover lunch and clothing. Over time, they’ll learn to make choices. A 12-year-old who gets $154 a week will think twice about spending $6 on candy; a 14-year-old with clothes allowance will soon discover discounted Ralph Lauren.
Most experts say that kids should do chores without being paid for them, but some side with the chores-for-pay camp. Decide where you stand, set rules and stick to them. If your child wants more money, suggest part-time work. When I refused to raise my 12-year-old daughter’s allowance, she found a dog-walking job.
Setting up a checking account for kids at 13 or 14 helps teach the basics; ideally, by the time they go to college they’ll be able to handle their finances. In the New York City area, Republic National Bank, allows children to open their own savings accounts with no minimum balance. Other banks nationwide offer similar programs; parents are usually required to cosign accounts.
Credit cards (with clear limits as to when and how they’re to be used) are both a fact of life and a safety measure. You don’t want your traveling teen to run out of money or gasoline. Cards are also convenient for parents, notes one mother of three teenagers; without credit cards, she would be forever going to the bank for cash, especially on vacations.
Investing and Inheriting
If children stand to inherit a substantial amount of money, begin discussing it with them in their mid-teens, (Some experts advise starting earlier, depending on the situation. According to a U.S. Trust survey, the average age at which trusts kick in is 28; some, however, start as early as 18). Be open about it. Let them know the mount of money involved, along with any conditions or restrictions. You can also introduce your teen to an accountant or financial planner. This removes some of the potential personal tension from family money discussions,.
Philanthrophy
Make charitable giving a family activity. Teach your kids to give money away early on; take them to a soup kitchen. As they move into their mid-teens, the can begin making suggestions about donations. The Tides Foundation has developed a screening program that finds projects for young donors. The philanthropic Initiative works with families and young donors to design and/or run philanthropic programs that will reflect and reinforce their values.
Investment Clubs
The National Association of Investors Corporation helps organize clubs and offers Investing for Life, a guide to investments and personal finance for teenagers. (You may need to help teens decipher thi; it’s not light reading.)
