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Financial Literacy For Kids

TEACH THE KIDS FINANCE

"And When They Get Old They Will Not Depart From It!"

 

A while back I did an article called “The Middle Class Matrix.”  The purpose of this article was to show how being stuck in a middle class rut is a cycle.  This cycle is very a hard one to break, because children will always follow in the footsteps of their parents.

Now what’s interesting is that a lot of grown folks out there have gotten into “messed up” situations financially.  And for some (even younger people), it has gotten so bad that they have given up becoming wealthy and think to themselves, “Well, at this point, I will just do the best I can to teach my kids everything that I know so that they won’t be in the situation that I’m in.”  This is really too bad because when it comes to being wealthy, the game isn’t over until you say it is!

Another thing that is interesting is that in most cases it makes no sense to say that you will teach your children so they won’t be in the situation that you are in.  Why?  Because what you know is the reason that you are where you are right now.  If you knew how to be “this” or “that” then YOU WOULD BE “this” or “that.”  So in most cases, you can’t teach someone to be something that you are not.  And even if you could, children follow what you do, and not what you say.

Fortunately, when it comes to personal finance, there are some encouraging signs when it comes to teaching children about money.  Now while I believe that most people don't really know how to be wealthy, I truly believe that most everyone knows how to stay out of debt.  It is very simple.  Just spend less than what you make.  But I believe that due to outside factors (low self esteem, propaganda, falsified info on net worth, & the devaluing of currency); sometimes it is hard to do what you know!

So what can be done?  What can you do to teach your children financial literacy?  Well… I came across the following article that I thought was very interesting to say the least.  I will share this with you today.  Consider the following.

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Teaching Children About Money : Your Kids vs. Your Wallet

by Chemain Evans

How many instances have you pondered whether your kids believe money does really grow on trees? It probably seems like every time you turn around your pocketbook is being bombarded by the "gimme's". If you really look at your finance habits (and those of your children), you might realize that you haven’t given them a reason to think that you don't have a cash tree.

Truth is, all of us want things and children are no different. How simple it is to break out the plastic card(s) and quickly satisfy our desires. What message are we sending our children?

What follows is a plethora of ideas on how we can instill in our kids a greater understanding of money and the way it operates.

1. Get a Plan and a Savings Account

All kids should have their own savings account even if it is nothing more than a piggy bank. Whether your child has a job or gets an allowance, putting together a savings plan is paramount. Encourage your children to donate a specific amount to charity (to assist them in getting into a habit of assisting others). After that, establish a certain percentage for long term savings (like college) and short term savings (like toys, clothes, etc.).

Putting money aside for both short and long term goals will build a kid's confidence in his/her ability to save and helps him/her learn delayed gratification. And, after the savings goal has been reached, she/he might realize that the cash would have been better spent for something different.

Lastly, allow a small percentage for discretionary purchasing. You may see that the following percentages work well: 50% long-term savings, 10% spending, 30% short-term savings, 10% charity. Get a blueprint that works for you.

2. Have a Bill Paying Night

This is a wonderful activity to demonstrate to your school aged children where your income goes. You may even find out some things yourself.

First, get together a list of your weekly and/or monthly expenses and their amounts. The numbers don't have to be precise. Write the expenses and their amounts on separate sheets of paper. After that, add up your weekly income and use fake money (make your own, or use Monopoly® money) to represent the amount.

Then, take the expense slips and hand them to your kids. Have them come to you and "collect their bill" one expense at a time. This is a great visual depiction of how fast the paychecks dissipate!

Then you can talk about ways you can cut your spending to help stretch that income for things that are crucial. You may be really shocked at your children's input.

3. Encourage Your Children to Work

Even young kids can do extra chores around the yard or home to earn extra income. Teens should be encouraged to get a job. Working helps kids realize that cash comes at a cost, which will dispel the money-tree myth. Working also helps their self-esteem because you can teach them to take pride in what they do.

4. Get a Family Savings Fund

Save as a family for big purchases like vacations. Set up a box or jar for keeping the cash in and put up a chart tracking your progress where each member can be reminded.

5. Establish Purchasing Limits

Establish purchasing limits for things like shoes and clothes. Be willing to pay only so much for an item, but your kid must make up the rest with his/her own funds if he/she goes over the specified amount. For example, a child might want a $100 pair of shoes. You say you’ll pay what you normally pay (maybe $40) and he/she has to pay the difference. New clothes for school take a big chunk of the family budget; why not get the help of your children? Agree to pay only so much and then leave the rest up to them (within reason, of course). They might shock you with what they can accomplish with their cash. Encourage them to watch for sales in order to maximize their cash.

6. Take Your Kid To The Grocery Store

If your kid can work a calculator, she/he can help you shop for groceries. Give her/him a certain amount that you will spend on groceries and have her/him subtract each item from the total while you shop. Teach your children to compare food labels to get the best item for the money. Ask for her/his input about how you can cut down your total grocery bill.

There are a lot of ways to teach your kids the value of money and help them build important skills. Because if you don't, who will? So take the time to call a cease-fire in the battle between your wallet and your children and work out a compromise that’s a win-win for you and the kids.


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© Simple Joe, Inc.

Chemain Evans is a quality control specialist for Simple Joe, Inc., makers of the popular Simple Joe's Expense Tracker PC software. Expense Tracker is a quick and simple way to keep track of your expenses and stay within your budget. Expense Tracker is ideal for tracking personal, business, home and club expenses.

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And last but not least, if your child has an e-mail address, you can always have them subscribe to Free Your Mind Online!!! :)

Hope this has been helpful,

So until next time,

Free Your Mind... Online

Matt Mason

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