MONEY SMART KIDS Teaching Kids About Money by Janet Bodnar
A recent survey by Northwestern Mutual on how parents teach their kids about money turned up some interesting, and contradictory, findings. While 70% of parents are comfortable speaking with their children about money, half say they don't set a good example when it comes to handling money, and many don't discuss key financial issues with kids.
Because April is Financial Literacy for Youth month, I'd like to focus on areas parents in the study found most troublesome and boost your confidence with some practical advice.
While 57% of parents surveyed discuss the importance of saving versus spending, fewer than 40% discuss credit cards and loans.
Whether you shy away from this topic because you're in debt or because it seems too complicated, you can provide your children with simple facts. Kids need to know that using a credit card is the same as taking out a loan, and that lenders charge interest -- often 20% or more a year.
A simple example speaks volumes: Say you buy $2,000 worth of clothes with a card charging 18% interest, and pay $50 a month. It will take you more than five years to pay the balance. Pay less than $30 a month, and you'll never get out of debt. Moral: Pay your bill in full each month.
Parents are reluctant to discuss individual family finances because "children have no business knowing this."
Parents have every right to protect their financial privacy from a child who's too young to understand (and would only spill the beans to his friends). But as kids get older, they need more specific information about how parents decide to spend and save their money.
Even if you don't disclose your income, it's helpful for teenagers to have some idea of how much you spend on expenses such as your mortgage, car insurance and groceries, and how much you can afford to pay toward their college education.
A whopping 70% of those polled say kids in the U.S. feel "entitled" to have whatever they want whenever they want it.
If kids feel entitled, it's because that's what parents have taught them to expect -- either because we feel guilty or are afraid our kids won't love us, or simply because we can afford to indulge them. Don't be afraid to say "no," and tell your children why you're denying their request. They'll still love you, and they'll learn not to expect instant gratification.
GETTING STARTED
